Traders to pay up to Rs60,000 monthly in advance tax

WEB DESK: In a significant policy shift, the Federal Board of Revenue (FBR) has introduced a new advance income tax scheme for shopkeepers, with monthly payments starting from August 2024.

Under this scheme, traders in various markets will be required to pay up to Rs60,000 in advance income tax, depending on their location.

As part of the Finance Bill 2024, severe penalties have been introduced for non-compliance. Traders and shopkeepers who fail to register under the Tajir Dost Scheme risk having their shops sealed and may face imprisonment for up to six months or a fine, or both.

According to Business Recorder, Naeem Mir, Chief Coordinator of the Tajir Dost Scheme, revealed that the FBR aims to collect Rs50 billion in total under this new initiative for the current fiscal year. To date, over 58,000 small traders and new shopkeepers have been registered under the scheme, a notable figure but still short of the target of 3.2 million.

The new tax structure categorises shopkeepers by location, with varying amounts of monthly tax due. In 78 per cent of areas, traders will pay Rs5,000 per month. Those in 14 per cent of markets will face a monthly tax of Rs10,000, while 5 per cent of areas will see payments of Rs20,000 per month.

In 2 per cent of locations, the tax will be Rs30,000, and in 0.6 per cent of markets, Rs45,000. The highest tax bracket will see payments of Rs60,000 per month, applicable to the remaining 0.40 per cent of markets.

Mir emphasised that achieving the scheme’s goals will require the full cooperation of traders to ensure timely and voluntary payments. The FBR has outlined a detailed monthly tax table for traders across 42 cities, tailored to the specific income and tax obligations of different market areas.

To facilitate compliance, a simplified Urdu language tax return form for traders is expected to be released within the week. The FBR has also initiated an enforcement drive, issuing notices to ensure tax payments, though Mir stressed that a comprehensive national awareness campaign is essential for the scheme’s success.

For those operating very small shops—less than 50 square feet, makeshift shops, or kiosks—the tax is set at a fixed annual rate of Rs1,200. The monthly tax instalments will apply to a broad range of business types, including wholesalers, retailers, manufacturers-cum-retailers, and importers-cum-retailers.

A 25 per cent discount is available to traders who opt to pay the annual tax in one lump sum. However, some traders are challenging the rates at Regional Tax Offices (RTOs), and are advised to obtain signed or stamped copies of their objections.

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