The Federal Board of Revenue (FBR) has finalized a proposed tax scheme for small traders. Officials expect to announce the initiative in the 2026–27 federal budget. Meanwhile, the FBR is consulting stakeholders and seeking feedback on the proposal.
The scheme, called the Small Taxpayers Guidance System, targets small traders and shopkeepers. It will primarily cover businesses with annual turnover up to Rs 20 million. Furthermore, individuals operating businesses for at least three years may qualify. Eligible participants must also maintain business premises and meet specified conditions.
Simple Registration and Lower Compliance Burden
The proposed scheme offers a simplified registration process for small businesses. Taxpayers can register through the FBR IRIS portal or mobile application. Alternatively, they may seek assistance from authorized tax practitioners and facilitators.
Participation in the scheme will remain voluntary for eligible taxpayers. However, participants must maintain accurate and transparent financial records. Officials also propose a reduced and simplified tax rate. As a result, small businesses may face lower compliance costs than under standard taxation procedures.
The scheme may exempt certain businesses from mandatory POS installation. Additionally, some participants may avoid advanced digital integration requirements. Nevertheless, withholding taxes and other legal obligations will continue where applicable.
Focus on Documentation and Risk-Based Audits
Under the proposal, audits will generally target unusual or high-risk cases. Therefore, compliant taxpayers are less likely to face routine audits. However, unexplained banking transactions could trigger further scrutiny.
The FBR will compare declared income with banking activity and official records. Moreover, business size, assets, and lifestyle should align with reported income. Significant differences may raise concerns and result in audits.
Officials stated that honest taxpayers should not fear unnecessary investigations. They emphasized that the scheme aims to improve economic documentation. Furthermore, registered taxpayers may receive Active Taxpayer List status and lower withholding taxes. The initiative also seeks to encourage voluntary tax compliance nationwide.
