Taxpayers filing late returns may face daily penalties, although the applicable amount can be reduced for returns submitted within three months.
ISLAMABAD: The Federal Board of Revenue (FBR) has prescribed monetary penalties for taxpayers who fail to file their income tax returns for Tax Year (TY) 2026 within the prescribed deadline.
Under Section 182 of the Income Tax Ordinance, 2001, a person who fails to furnish an income tax return as required under Section 114 by the due date is liable to a penalty calculated on the basis of the tax payable for the relevant tax year.
Daily Penalty for Late Filing
The law provides that the penalty for late filing will be 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.
This means the penalty continues to accumulate for every day the taxpayer remains in default, subject to the minimum and maximum limits prescribed under the law.
Minimum Penalties Prescribed
The Income Tax Ordinance also sets minimum penalties for different categories of taxpayers.
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.
The minimum penalty provisions therefore apply even where the daily calculation would otherwise result in a lower amount.
Maximum Penalty Limited to 200% of Tax Payable
The law also places an upper limit on the penalty.
The maximum penalty cannot exceed 200 percent of the tax payable by the taxpayer for the relevant tax year.
This provision limits the overall financial exposure arising from prolonged delays in filing the income tax return.
Penalty Reduced for Late Returns Filed Promptly
Taxpayers who miss the original deadline can qualify for a reduction in the penalty if they subsequently file their returns within specified periods.
The penalty is reduced by:
• 75 percent if the return is filed within one month after the due date;
• 50 percent if filed within two months; and
• 25 percent if filed within three months.
The reductions apply where the return is filed within the prescribed period following the due date or any extended due date allowed under the law.
How Tax Payable Is Calculated
For purposes of calculating the penalty, the term “tax payable” refers to the higher of two amounts.
These include the tax chargeable on taxable income based on an assessment made or treated as made under Sections 120, 121, 122, 122D or 122E of the Income Tax Ordinance, or the tax payable for the immediately preceding tax year for which an income tax return was duly filed.
The provision is intended to establish a basis for calculating the penalty even where the taxpayer’s liability for the current tax year has not yet been finally determined.
Taxpayers Urged to Meet TY 2026 Deadlines
The penalty provisions underline the financial consequences of failing to comply with statutory income tax return filing requirements.
Taxpayers subject to the filing requirement for TY 2026 are therefore required to submit their returns within the prescribed deadlines to avoid daily penalties and other consequences under the Income Tax Ordinance, 2001.
The rules also provide an incentive for taxpayers who miss the deadline to file their returns as soon as possible, as the applicable penalty can be substantially reduced when the return is submitted within the first three months of the delay.