FBR Launches Special Tax Scheme for Small Shopkeepers Under SRO 1166(I)/2026
A Major Step Toward Ease of Doing Business for Pakistan’s Small Retail Sector
Small shopkeepers and retailers are the backbone of Pakistan’s economy. This sector from grocery stores and clothing outlets to electronics and household goods retailers, millions of small businesses creating employment opportunities and sharing in economic activity in the country. Small retailers always feel the tax system complex, difficult to comply with.
In this regard, the Federal Board of Revenue (FBR) has recently introduced a new Special Procedure for Small Shopkeepers through SRO 1166(I)/2026. It will simplify tax compliance, increase in no of taxpayers, and business-friendly environment for small retailers across the country.
What is SRO 1166(I)/2026?
On July 27, 2026, the Federal Board of Revenue issued SRO 1166(I)/2026 under Section 99B read with Section 237 of the Income Tax Ordinance, 2001. The notification introduces a special tax procedure applicable to eligible small shopkeepers for Tax Year 2026.
The main purpose of this scheme is to provide a simple and practical tax system that allows small retailers to fulfill their tax obligations.
Who Can Benefit from This Scheme?
The special procedure is designed for individual shopkeepers whose annual turnover does not exceed PKR 200 million.
The scheme will target small retailers operating a single retail shop.
Who Is Not Eligible?
The special procedure does not apply to:
- Individuals whose turnover exceeded PKR 200 million in any of the previous three years.
- Owners of more than one shop.
- Tier-1 retailers.
- Jewelry businesses.
- Professional service providers such as doctors, engineers, consultants, and lawyers.
- This procedure applies only to shop income – other sources of income are excluded.
It is a Completely Voluntary Scheme
This is totally A voluntary scheme. Eligible shopkeepers are free to choose between:
- Filing taxes under the new special procedure; or
- Continuing to file regular income tax returns under the standard tax regime.
What is Tax Rate: Just 1% of Turnover
Under this scheme, shopkeepers will pay tax at the rate of 1% of gross turnover.
This will simplify tax calculations, adjustments, and assessments. Shopkeepers can now easily compute their tax liability based on their total annual turnover.
No Need of POS and Digital Invoicing Requirements
Under SRO 1166(I)/2026:
- Eligible shopkeepers will not be required to install a sales tax POS system.
- Eligible participants will not be required to implement digital invoicing systems.
No Withholding Tax Requirements
Normally, are required to withhold taxes on specific purchases under tax law of Pakistan. But under this SRO there is no need to deduct income tax.
- Shopkeepers will not be required to withhold tax on purchases of goods or services under Section 153 of the Income Tax Ordinance.
No Minimum Tax Under Section 113
It also gives relief from the minimum tax provisions under section 113. Shopkeepers under this scheme will not be subject to:
- The minimum tax provisions of Section 113; and
- The 1.25% tax provisions shall not apply
Minimum Tax Requirement Under FBR’s Special Procedure for Small Shopkeepers
Under FBR SRO 1166(I)/2026, shopkeepers must pay a minimum tax of PKR 25,000 along with their income tax return, regardless of withholding taxes already deducted. The payable tax will be the higher of net tax liability after adjustments or PKR 25,000.
Simplified Tax Return Filing
For this purpose the FBR has introduced a simplified one-page tax return designed for shopkeepers participating in the scheme. The return will require basic information such as:
- Total annual sales
- Total purchases
- Business expenses
- Net profit
- Tax payable
- Assets and capital information
Importantly, the form will be made available in Urdu and regional languages.
Easy Registration Process
Eligible shopkeepers have option to register themselves through:
- The FBR IRIS Portal
- A dedicated mobile application
- Their nearest tax office
Reduced Audit Exposure
According to the notification, shopkeepers opting into the scheme will generally not be subject to audit in the ordinary course of business. However, FBR can take action in limited circumstances, including:
- Unusual economic transactions;
- Acquisition of expensive assets that appear inconsistent with declared business activity; or
- Gross misuse of this special procedure to evade taxes.
Introduction of the “Green Plate”
Scheme has introduced Compliant Shopkeeper Plate, commonly referred to as the “Green Plate.” Shopkeepers under this scheme will receive a plate consisting:
- The shopkeeper’s name
- NTN details
- Shop address
- An FBR-issued QR code
Shopkeeper will place Green Plate prominently outside the business premises. Moreover, tax officials normally will not enter shopkeepers businesses regarding tax matters when the shopkeeper has Green plate displayed.
Frequently Asked Questions about SRO 1166
Answer: SRO 1166(I)/2026 is a income tax SRO issued by the Federal Board of Revenue (FBR) introducing a simplified and voluntary tax regime for small shopkeepers in Pakistan.
Answer: The scheme is available to individual shopkeepers whose annual turnover is up to PKR 200 million and who meet all the requirements given in SRO.
Answer: This scheme is voluntary in nature. Shopkeepers can either opt for this scheme or continue filing regular income tax returns.
Answer: Shopkeepers will pay tax at the rate of 1% of their gross annual turnover.
Answer: The major benefits include: 1% turnover-based tax, Simple one-page return, No POS requirement, No digital invoicing requirement, No withholding tax on purchases, Reduced audit exposure, Easy registration process, Voluntary participation.
Tags
How to Register for NTN in Pakistan | Complete Guide to FBR IRIS Portal | How to File Income Tax Return in Pakistan | Benefits of Becoming an Active Taxpayer | Difference Between Filer and Non-Filer | FBR POS Integration Explained | Digital Invoicing System in Pakistan
