FBR Rolls Out New Fixed Tax Scheme for Small Shopkeepers

The Federal Board of Revenue on Monday notified the Special Procedure for Small Shopkeepers for Tax Year 2026, a measure aimed at bringing the country’s sprawling retail sector into the tax net through a simplified compliance framework.

The scheme is designed for individuals deriving income exclusively from retail shop operations, provided their annual turnover does not exceed Rs. 200 million.

Issued under the Special Procedure for Small Shopkeepers, the scheme applies only to income earned from retail shops. It excludes retailers whose annual turnover exceeded Rs. 200 million in any of the previous three tax years, owners of more than one shop, Tier I retailers, jewelry sellers, and professionals such as doctors, engineers, and lawyers.

Under the new procedure, shopkeepers can register through the IRIS web portal, the Shopkeepers’ Mobile Application, or by visiting the nearest tax office. The scheme remains optional, allowing eligible retailers to either opt for the simplified procedure or continue filing a regular income tax return.

Retailers choosing the scheme will be allowed to adjust withholding tax against their tax liability. However, they must pay at least Rs. 25,000 in cash with their annual return, even if their withholding tax exceeds the amount payable. No refund will be issued where withholding tax is higher than the minimum tax due.

The FBR said shopkeepers opting for the special procedure will generally not be subject to tax audits. Investigations may only be initiated, in consultation with trade associations, if third party information points to significant financial transactions, ownership of expensive assets, or misuse of the scheme for tax avoidance.

Eligible retailers will file a simplified tax return declaring their sales, purchases, expenses, net profit, and assets. The form will be available in Urdu and regional languages, and participants will not be required to install sales tax point of sale systems or digital invoicing infrastructure.

They will also be exempt from withholding tax obligations under Section 153 and the minimum tax provisions under Section 113 of the Income Tax Ordinance.

Shopkeepers who neither file a regular income tax return nor opt for the new scheme by the due date will face penalties of Rs. 10,000 for the first default, Rs. 25,000 for the second, and Rs. 50,000 for the third, with at least a one month gap between each penalty proceeding.

Retailers participating in the scheme will also receive an FBR Compliant Shopkeeper Plate, commonly referred to as the Green Plate, featuring a QR code, the shopkeeper’s name, National Tax Number, and business address. The FBR said tax officials will generally not enter shops displaying the Green Plate for matters covered under the special procedure.