The Finance Bill for FY2026-27 has sharply raised penalties for tax non-compliance, covering income tax, sales tax, and federal excise duty, giving the Federal Board of Revenue (FBR) significantly stronger enforcement powers.
The cost of rejoining the Active Taxpayers List has been raised fivefold for companies to Rs100,000 from Rs20,000, while associations of persons will pay Rs50,000, up from Rs10,000.
For individual taxpayers, the ATL restoration fee has risen to Rs25,000 from Rs1,000, representing a 25-fold increase that will place a considerably heavier financial burden on smaller filers.
Penalties for failure to produce records during audit proceedings have been tripled across all tiers, rising to Rs100,000, Rs200,000, and Rs300,000 from Rs25,000, Rs50,000, and Rs100,000 respectively.
The penalty for providing false or misleading information has been raised to Rs500,000 or 100 percent of the tax shortfall, whichever is higher, up from Rs25,000 or 100 percent previously.
Concealment of income or submission of incorrect details now attracts a penalty of Rs1 million, increased tenfold from Rs100,000, while existing provisions tied to tax evaded amounts continue to apply.
Failure to deduct or collect withholding tax will now carry a penalty of Rs500,000, a significant increase from the existing Rs40,000, with company officials personally liable for an additional Rs500,000.
The Finance Bill also targets misuse of withholding tax credits, introducing new penalties equal to the full amount of any excess credit claimed by a taxpayer or business.
In sales tax, the fixed penalty for late filing has been raised to Rs50,000 from Rs10,000, while the daily penalty for returns filed within 10 days has risen to Rs2,000 from Rs200.
Further sales tax penalties have been raised from Rs5,000 or 3 percent to Rs25,000 or 5 percent of the tax involved, and from Rs10,000 or 5 percent to Rs50,000 or 10 percent, whichever is higher.
An additional daily default surcharge within 10 days has been raised tenfold, from Rs500 per day to Rs5,000 per day, while another penalty has increased from Rs10,000 to Rs50,000.
Tax authorities have also tightened action against persistent non-compliance, with the law permitting penalties of up to Rs1 million and the physical sealing of business premises after 2 months.
