ISLAMABAD: The Federal Board of Revenue (FBR) is set to introduce a new simplified tax regime for small traders and shopkeepers in the upcoming federal budget for FY2026-27, aiming to expand the tax base while reducing compliance burdens for small businesses.
According to details shared with stakeholders, the proposed Small Taxpayers Guidance System has been designed to improve economic documentation and encourage voluntary tax compliance through simplified procedures, easier registration, and lower administrative requirements.
Under the proposed framework, the scheme will be available to small traders and shopkeepers with an annual turnover of up to approximately Rs. 20 million. Business owners operating for at least three years and maintaining a physical shop or business premises will be eligible to apply. Existing taxpayers may also opt into the scheme if they meet the prescribed criteria.
The FBR plans to offer simplified registration through its IRIS portal, mobile application, and authorized tax practitioners, making it easier for small businesses to join the formal tax system. Participation in the scheme will remain voluntary, but taxpayers will be required to maintain accurate and transparent business records.
A major attraction of the proposed system is a lower and simplified tax structure compared to the existing taxation regime. The proposal also seeks to ease compliance requirements by allowing simplified record-keeping practices and exempting eligible businesses from mandatory Point of Sale (POS) integration and certain advanced digital reporting obligations.
The new scheme also includes a risk-based audit mechanism under which compliant taxpayers would face a reduced likelihood of audit selection. Audits would generally be initiated only in cases involving unusual financial activity, unexplained banking transactions, significant mismatches between declared income and assets, or discrepancies identified through government database cross-checks.
Tax officials believe the initiative will help bring more businesses into the documented economy without imposing excessive costs on small enterprises. Businesses registered under the scheme may also gain access to benefits such as Active Taxpayer List (ATL) status, reduced withholding tax rates, and improved access to formal banking and credit facilities.
The proposal is currently being discussed with stakeholders and may become part of the FY2026-27 federal budget, subject to final approval by the government.
