Pakistan FBR tax policy and administration changes

The Federal Board of Revenue (FBR) in Pakistan has introduced new measures regarding income tax administration and relief for specific taxpayer groups.

Initially, the FBR proposed amendments to the Income Tax Rules, 2002, which would allow late filers to enter the Active Taxpayers List (ATL) without the standard surcharge. To qualify, taxpayers must submit a formal undertaking via the Iris system and agree to a six-month restriction on purchasing or acquiring property. The FBR stated it would monitor compliance through financial and registry data, with the threat of permanent surcharge reinstatement if the restriction is violated.

To alleviate the financial burden on employees in both the public and private sectors, FBR Chairman Rashid Mahmood Langrial directed officials to stop issuing advance income tax notices to salaried individuals whose sole source of income is their monthly salary. This move follows public criticism regarding tax distribution; former Finance Minister Asad Umar previously noted that the salaried class contributed over Rs600 billion in taxes last year, while landlords contributed less than Rs10 billion. Individuals with additional income sources, such as rental income or business profits, remain subject to adjustable advance income tax.

Recently, tax experts and business chambers have urged the FBR to extend the 2026 tax year filing deadline for income tax returns and wealth statements to December 2026. Stakeholders cite technical issues with the IRIS online filing portal and delays in processing applications. Additionally, the FBR reported low participation in a special tax scheme for small traders and shopkeepers, receiving only 130 returns despite an expected turnout of 500,000 to 600,000 filings.