Taxpayers face daily penalties for late income tax returns, while separate fines apply for failing to submit wealth statements.

ISLAMABAD: The Federal Board of Revenue (FBR) has outlined substantial monetary penalties for taxpayers who fail to file their income tax returns and wealth statements for Tax Year 2026 as the September 30 deadline approaches.

The statutory deadline for filing income tax returns and wealth statements is September 30, 2026. The FBR has so far not announced any extension, despite calls from business groups and tax bars seeking additional time for taxpayers to complete their filings.

With the deadline fast approaching, the tax authority is maintaining pressure on individuals, businesses and corporate entities required to fulfil their annual tax obligations.

Under the Income Tax Ordinance, 2001, taxpayers who fail to submit their returns within the prescribed period may face significant financial penalties.

Penalty for late income tax return

A person who fails to furnish a return of income required under Section 114 by the due date is liable to a penalty based on the duration of the default.

The penalty is the higher of:

• 0.1 percent of the tax payable for the relevant tax year for each day of default; or

• Rs1,000 for each day of default.

The law also prescribes minimum penalties. For an individual deriving 75 percent or more of income from salary, the minimum penalty is Rs10,000.

In all other cases, the minimum penalty is Rs50,000.

However, the maximum penalty cannot exceed 200 percent of the tax payable by the taxpayer for the relevant tax year.

Penalty reduction for late filers

Taxpayers who miss the September 30 deadline may qualify for a graduated reduction in the applicable penalty if they subsequently file their returns.

The penalty is reduced by:

• 75 percent if the return is filed within one month;

• 50 percent if filed within two months; and

• 25 percent if filed within three months,

after the original or extended due date prescribed under the law.

How tax payable is determined

For calculating the applicable penalty, the expression “tax payable” refers to the higher of the tax chargeable on taxable income based on an assessment made or treated as made under Sections 120, 121, 122, 122D or 122E, or the tax payable for the immediately preceding tax year for which a return of income was duly filed.

This provision determines the amount against which the daily penalty for late filing is calculated.

Separate penalty for wealth statement

The tax regime also provides a separate financial penalty for failing to submit a wealth statement or wealth reconciliation statement where required.

Under the applicable provisions, a person who fails to furnish the required statement is liable to a penalty of 0.1 percent of taxable income per week or Rs100,000, whichever is higher.

Who must file by September 30?

The September 30 deadline applies to a broad range of taxpayers.

Those required to complete their annual filing by the deadline include salaried individuals, business individuals, Associations of Persons (AOPs) and corporate entities operating on a special financial year, along with the relevant wealth statements where applicable.

With the deadline now only days away, taxpayers who have yet to complete their Tax Year 2026 filings face the prospect of financial penalties if they fail to meet their statutory obligations.