The Federal Board of Revenue (FBR) has issued S.R.O. 1166(I)/2026, dated 27 July 2026, introducing a Special Procedure for Small Shopkeepers under section 99B read with section 237 of the Income Tax Ordinance, 2001. The regime is applicable for Tax Year 2026 and is designed to facilitate tax compliance for eligible small retailers.

Key Highlights

• Eligibility: Applicable to individuals earning income mainly through retail shops with annual turnover up to PKR 200 million.

• Who is Excluded?
  • Retailers whose turnover exceeded PKR 200 million in any of the preceding three years.
  • Persons owning more than one shop.
  • Tier-1 retailers.
  • Sellers of jewellery.
  • Providers of professional services (including doctors, engineers and lawyers).
  • The procedure applies only to retail shop income.

• Optional Regime: Eligible shopkeepers may either opt for this special procedure or continue filing a regular income tax return.

• Tax Liability:
  • Tax payable at 1% of gross turnover.
  • Withholding taxes may be adjusted against the liability.
  • A minimum cash tax payment of PKR 25,000 is mandatory with the return, and no refund will be available where withholding taxes exceed the tax payable under this regime.

• Audit Relief: Taxpayers opting for the procedure will generally not be subjected to audit, except in limited circumstances involving credible third-party information regarding significant transactions, expensive assets or misuse of the scheme.

• Simplified Return: A simplified return has been prescribed for reporting sales, purchases, expenses, net profit and assets through the IRIS portal or the dedicated mobile application.

• Additional Benefits:
  • No withholding obligation under section 153.
  • Minimum tax under section 113 and tax at the rate of 1.25% will not apply.
  • Eligible taxpayers will not be required to install POS or digital invoicing systems.
  • A “Green Plate” containing a QR Code will be issued to compliant shopkeepers.

Our Comments

The notification reflects FBR’s effort to simplify tax compliance for small retailers by introducing a straightforward tax regime with reduced compliance obligations and audit protection. Eligible businesses should carefully evaluate whether opting for this special procedure would be more beneficial than filing under the normal tax regime, considering their turnover, withholding tax profile and overall tax position.

For assistance in determining eligibility or evaluating the tax implications of this regime, please contact our tax advisory team.