The Federal Board of Revenue (FBR) has unveiled a draft special tax procedure for small shopkeepers, proposing a fixed tax of 1% on gross annual turnover with a minimum annual payment of Rs25,000 as part of efforts to bring more than three million retailers into the tax net during the current fiscal year.
The proposal, issued through Statutory Regulatory Order (SRO) 1109(I)/2026, has been published under Section 99B of the Income Tax Ordinance, 2001, for public information. The FBR has invited objections and suggestions from stakeholders within seven days of its publication in the official Gazette.
Under the proposed “Draft Special Procedure for Small Shopkeepers,” the scheme will apply to individuals earning income primarily from retail shops with an annual turnover of up to Rs200 million for the tax year 2026.
However, the scheme will not cover retailers whose annual turnover exceeded Rs200 million in any of the previous three tax years, owners of multiple shops, Tier-I retailers, jewellers, or professionals such as doctors, engineers and lawyers. It will also exclude individuals whose retail income is combined with income from other sources.
Retailers who filed income tax returns for the 2025 tax year may opt for the new procedure, provided their tax liability under the scheme is not lower than the amount paid for 2025 and they have not restructured or renamed their businesses to qualify for the facility.
Eligible shopkeepers will be able to register through the FBR’s IRIS web portal, the dedicated shopkeepers’ mobile application, or by visiting their nearest tax office.
The proposed procedure will remain voluntary, allowing retailers to either pay tax under the special scheme or continue filing regular income tax returns. Under the proposal, tax will be calculated at 1% of gross annual turnover.
Retailers will be allowed to adjust withholding tax already deducted against their payable tax. However, if the withholding tax exceeds the minimum tax liability under the scheme, no refund will be granted.
To qualify for the special procedure, shopkeepers must pay at least Rs25,000 in cash along with their income tax return, regardless of any taxes already deducted or collected at source.
According to the draft, the final tax liability will be the higher of either the tax payable after adjusting withholding tax or the minimum payment of Rs25,000.
The FBR has also proposed exempting retailers who opt for the scheme from routine tax audits, providing additional incentive for voluntary compliance.
What tax rate has the FBR proposed for small shopkeepers?
The FBR has proposed a fixed tax of 1% of gross annual turnover, with a minimum annual payment of Rs25,000.
Who is eligible for the proposed tax scheme?
The scheme is for individual retailers with an annual turnover of up to Rs200 million. It does not apply to Tier-I retailers, jewellers, owners of multiple shops, professionals, or businesses exceeding the turnover limit.
Is the proposed tax scheme compulsory?
No. The scheme is optional. Eligible shopkeepers can either opt for the special procedure or continue filing their regular income tax returns under the existing tax system.
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