The Federal Board of Revenue (FBR) has prepared a simplified tax scheme for small traders and shopkeepers that is likely to be introduced in the federal budget for FY2026-27, as part of efforts to improve documentation of the economy and encourage voluntary tax compliance.
According to details shared with stakeholders, the proposed scheme, titled the Small Taxpayers Guidance System, is designed to bring more small businesses into the formal tax net through easier procedures and lower compliance requirements.
Under the proposal, the scheme will be available to small traders and shopkeepers with annual turnover of up to around Rs. 20 million. Individuals who have been operating a business for at least three years and maintain a shop or business premises will be eligible to apply. Existing taxpayers may also opt for the scheme if they meet the required conditions.
The proposed framework offers simplified registration through the FBR’s IRIS portal, mobile application, or authorized tax practitioners. Participation in the scheme will remain voluntary, but taxpayers joining it will be expected to maintain transparent and accurate business records.
A central feature of the proposal is a lower and simplified tax rate compared to the standard tax regime. The scheme also aims to reduce the compliance burden on small businesses by allowing simplified record-keeping and exempting certain eligible businesses from mandatory POS installation and advanced digital integration requirements.
FBR has also proposed a risk-based audit system under the new framework. Under this mechanism, compliant taxpayers will face a lower chance of being selected for audit, while audits will generally be triggered only in cases of unusual financial activity, unexplained banking transactions, major gaps between declared income and assets, or discrepancies identified through cross-checking with official databases.
Officials say the proposed scheme is intended to broaden the tax base without placing excessive compliance costs on small businesses. Traders who register under the system may also benefit from Active Taxpayer List status, reduced withholding tax rates, and improved access to financial services and formal credit.
The proposal is currently being discussed with stakeholders and may be included in the FY2026-27 federal budget, subject to final approval by the government.
