KARACHI: The Federal Board of Revenue (FBR) is preparing to introduce a simplified tax scheme for small traders and shopkeepers as part of the Federal Budget 2026-27, aiming to encourage voluntary tax compliance and expand the country’s tax base.
According to official sources, consultations with stakeholders are underway to finalize the framework before its expected announcement in the upcoming budget. The proposed scheme is designed to make tax compliance easier for small businesses while bringing more traders into the formal economy.
Under the plan, businesses with an annual turnover of up to Rs20 million will be eligible to participate. Traders who have been operating their businesses for at least three years will also qualify for enrollment.
Registration is expected to be available through the FBR’s IRIS portal, mobile applications and designated tax facilitation centres.
Simplified compliance framework
Officials said participation in the scheme will be voluntary, but registered traders will be required to maintain basic records of sales, purchases and business expenses.
The proposed framework also includes a simplified tax structure, with tax liability expected to apply only to income above a specified threshold. Authorities are considering lower tax rates to encourage participation among small businesses.
One of the key features under consideration is reduced regulatory scrutiny. Participants are generally expected to be exempt from routine audits, although authorities may conduct reviews in cases involving unusual financial transactions or discrepancies in reported income.
Incentives for registered traders
The scheme is also expected to provide several benefits for compliant taxpayers, including inclusion in the Active Taxpayers List (ATL), lower withholding tax rates and improved access to financial services.
Sources said some small businesses may also receive exemptions from point-of-sale (POS) integration requirements and certain digital reporting obligations, reducing compliance costs and administrative burdens.
At the same time, strict penalties are expected for traders found concealing income, failing to file tax returns or violating the scheme’s reporting requirements.
Officials said the initiative forms part of broader government efforts to improve tax documentation, increase voluntary participation in the tax system and strengthen revenue collection while facilitating small businesses.
The proposed scheme is expected to be formally unveiled as part of the Federal Budget 2026-27.
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