New Framework Targets Simplified Tax Compliance
ISLAMABAD: The federal government has proposed a new fixed tax regime for small retailers and shopkeepers under Section 99B of the Income Tax Ordinance as part of the Federal Budget 2026-27.
The initiative aims to simplify tax compliance, broaden the tax base, and encourage greater participation in the formal economy. Under the proposed framework, small retailers with annual sales of less than Rs10 million will pay a fixed tax equivalent to 0.5 percent of their annual turnover.
According to budget documents, eligible retailers will be allowed to adjust withholding taxes already deducted against their final tax liability. However, a minimum payment of Rs25,000 will be mandatory at the time of filing the required statement.
Officials said the scheme has been designed to reduce compliance burdens on small businesses while promoting transparency and documentation.
Audit Exemptions and Simplified Procedures Announced
The government has proposed several incentives for retailers opting into the scheme. Businesses covered under the fixed tax regime will not be subjected to routine tax audits, providing greater certainty and ease of doing business.
In addition, participating retailers will not be required to withhold tax on purchases or install point-of-sale (POS) machines, reducing operational and administrative costs.
Authorities stated that only eligible businesses already registered in the Federal Board of Revenue (FBR) database will qualify for inclusion in the program.
Digital Integration to Improve Transparency
To enhance transparency and encourage digital documentation, the government plans to introduce a colour-rating system for participating retailers. Each business will receive a verified QR code, allowing customers and authorities to verify registration status easily.
Furthermore, officials announced that simplified tax returns and monthly statements will be made available in major regional languages alongside English and Urdu to improve accessibility.
The government also stated that tax amounts under the scheme will be adjusted annually for inflation. Additional incentives linked to digital integration and formal business practices may also be incorporated in future revisions.
Officials believe the proposed system will encourage tax compliance among small retailers while reducing complexity and supporting the broader objective of economic documentation and digital transformation.
