FBR Plans New Tax Scheme for Small Traders and Shopkeepers in Budget 2026-27

The Federal Board of Revenue (FBR) has prepared a new simplified tax scheme for small traders and shopkeepers, which is expected to be unveiled as part of the federal budget for FY2026-27.

According to details shared with stakeholders, the proposed Small Taxpayers Guidance System is aimed at improving documentation of the economy while encouraging voluntary tax compliance through simplified procedures and reduced compliance requirements.

Key Takeaways from Proposal

• The scheme would be available to small traders and shopkeepers with annual turnover of up to approximately Rs. 20 million.
• Individuals operating businesses for at least three years and maintaining a shop or business premises would be eligible, while existing taxpayers may also join if they meet the prescribed conditions.
• The proposed framework offers simplified registration through the FBR’s IRIS portal, mobile application, or authorized tax practitioners.
• Participation will be voluntary, although taxpayers will be expected to maintain transparent and accurate business records.

A key feature of the scheme is the possibility of a lower and simplified tax rate compared to the standard taxation regime. The proposal also seeks to reduce compliance burdens by allowing simplified record keeping and exempting certain small businesses from mandatory POS installation and advanced digital integration requirements.

The FBR has also proposed a risk-based audit framework under which compliant taxpayers would face a lower likelihood of audit selection. Audits would generally be triggered only by unusual financial activity, unexplained banking transactions, significant discrepancies between declared income and assets, or inconsistencies identified through cross-checking with government databases.

Officials say the scheme is intended to expand the tax base without imposing excessive compliance costs on small businesses. Registered taxpayers may also benefit from Active Taxpayer List status, lower withholding taxes, and improved access to financial services and formal credit channels.

The proposal is currently under consultation with stakeholders and may be incorporated into the FY2026-27 budget, subject to final government approval.