The Federal Board of Revenue (FBR) has notified the Special Procedure for Small Shopkeepers for tax year 2026, allowing eligible retailers with annual turnover of up to Rs200 million to pay income tax at a fixed rate of one per cent of gross turnover.
The scheme, issued under Section 99B read with sub-section (1) of Section 237 of the Income Tax Ordinance, 2001, was previously published under SRO 1109(I)/2026 dated July 14, 2026. It remains optional, allowing shopkeepers to choose between this procedure and filing a regular income tax return.
The special procedure excludes individuals whose turnover exceeded Rs200 million in any of the preceding three years, owners of more than one shop, Tier-I retailers, jewellery sellers, and professionals such as doctors, engineers and lawyers.
It applies only to income earned from shops, while income from other sources remains excluded. Retailers who filed returns for tax year 2025 may also opt for the scheme, provided their payable tax is not lower than in 2025 and their business has not been split or renamed to avail the facility.
Shopkeepers can register through the IRIS web portal, the Shopkeepers Mobile Application, or by visiting the nearest tax office. Withheld income tax may be deducted from the payable amount, though no refund will be issued if the withholding tax exceeds the minimum payable under the scheme.
Shopkeepers must pay a minimum of Rs25,000 in cash along with their return, regardless of any tax already deducted or collected at source. The payable amount, after adjustment of withholding tax, or Rs25,000, whichever is higher, will apply.
Shopkeepers opting for the scheme will generally not be subject to audit. Departmental proceedings may be initiated only in consultation with trade association representatives, and only where the FBR receives third-party information regarding significant or unusual transactions, ownership of expensive assets, or misuse of the procedure to avoid tax.
Shopkeepers will file a simplified return, Annex-I, through IRIS or the mobile application, declaring total sales, total purchases, other expenses and net profit. The same form will allow shopkeepers to declare their assets and will be available in Urdu and regional languages.
Shopkeepers under this procedure will not be required to withhold tax on purchases of goods or services under Section 153 of the Ordinance. The minimum tax provisions under Section 113, along with the 1.25 per cent tax rate, will also not apply.
Failure to file a regular return or opt for the special procedure by the due date will attract penalties of Rs10,000 on the first default, Rs25,000 on the second, and Rs50,000 on the third, with at least a one-month gap between each default proceeding.
Eligible shopkeepers will not be required to install a sales tax POS system or digital invoicing infrastructure, and will be entitled to claim credit for imputable income based on tax paid to support personal expenses and asset accretion.
Qualifying shopkeepers will be issued a Compliant Shopkeeper Plate, or Green Plate, bearing an FBR-specified QR code, the shopkeeper name, NTN, and shop address. The plate must be displayed prominently outside the shop, and no FBR official may enter the premises in its presence in respect of tax matters concerning a bona fide shopkeeper.
