Section 174 of the Income Tax Ordinance, 2001, requires taxpayers to retain tax records for six years, with longer retention where proceedings remain pending or specific statutory exceptions apply.
The Federal Board of Revenue (FBR) has reiterated the requirement for taxpayers to maintain accounts, documents and records for six years under Pakistan’s income tax law for Tax Year 2027.
The FBR has issued the Income Tax Ordinance, 2001, updated up to June 30, 2026, for Tax Year 2027, covering the period from July 1, 2026, to June 30, 2027.
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Under Section 174, taxpayers must maintain the prescribed accounts, documents and records in Pakistan unless the Commissioner authorises otherwise.
The law requires these records to be retained for six years after the end of the relevant tax year. However, if proceedings are pending before any authority or court, taxpayers must preserve the records until a final decision is reached.
Pending proceedings include assessment or amendment of assessment, appeals, revisions, references, petitions, prosecutions and proceedings before an Alternative Dispute Resolution Committee.
The prescribed six-year limitation does not apply to records relating to income, assets, expenses or transactions covered by Section 111(2)(ii) of the Ordinance.
Impact on deductions
Section 174 also empowers the Commissioner to disallow or reduce a taxpayer’s deduction claim if the taxpayer cannot provide a receipt or other documentary evidence supporting the transaction or circumstances behind the claim, without reasonable cause.
For this purpose, a deduction includes amounts debited to trading accounts, manufacturing accounts, receipts and expenses accounts, or profit and loss accounts.
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The provision further authorises the FBR to require specified persons or classes of persons to install and use prescribed electronic resources. Through an official Gazette notification, the Board may also require businesses to operate as integrated enterprises to facilitate the receipt, storage, matching and access of transaction information relevant to their tax liabilities.
Taxpayers should therefore retain supporting invoices, receipts, accounting records and relevant transaction documents to substantiate their declared income, expenses and deductions. Records linked to ongoing proceedings or transactions covered by statutory exceptions may need to be preserved beyond the ordinary six-year period.