FBR finalises simplified tax scheme for traders with turnover up to ₨20 million

The Federal Board of Revenue (FBR) has prepared a new tax scheme for small traders and shopkeepers that is expected to be announced in the federal budget for fiscal year 2026-27, with consultations currently underway to seek feedback from stakeholders, Business Recorder reported.

Under the proposed Small Taxpayers Guidance System, the scheme will apply to traders and shopkeepers with an annual turnover of up to ₨20 million.

According to the proposed framework, individuals who have operated a business for at least three years, maintain a shop or business premises and do not belong to specialised professional services may qualify for the scheme. Existing taxpayers who were filing returns before 2025 may also join if they meet the eligibility criteria.

Registration will be available through the FBR's IRIS portal, mobile application and authorised tax practitioners or facilitators.

Participation in the scheme will be voluntary. However, taxpayers will be required to maintain accurate records of sales, purchases, expenses and other business transactions.

The FBR has proposed a lower and simplified tax rate for eligible participants compared to the standard taxation regime. Tax liability will generally arise once annual income exceeds the prescribed threshold under the scheme.

The proposed framework also seeks to reduce compliance burdens by exempting certain eligible businesses from mandatory installation of point-of-sale (POS) systems and advanced digital integration requirements.

According to the proposal, audits will generally be limited to high-risk cases involving unusual financial activity, unexplained banking transactions or discrepancies between declared income, assets and spending patterns.

The FBR will continue to cross-check taxpayer declarations with information received from financial institutions and government agencies. Large differences between declared income and bank transactions, or assets and expenditures that do not match reported income, may trigger audit proceedings.

The proposed scheme retains applicable withholding tax obligations and other legal requirements under existing tax laws. Failure to file returns, concealment of income or violation of scheme conditions may result in penalties and legal action.

The FBR said the initiative is aimed at encouraging voluntary tax compliance, improving documentation of the economy and bringing more small businesses into the formal tax system.

Registered participants may also benefit from Active Taxpayer List (ATL) status, lower withholding tax rates and improved financial credibility.