Taxpayers can avoid surcharge by pledging not to acquire any property for six months
ISLAMABAD: In a significant relief measure for individual taxpayers, the Finance Act, 2026 has introduced a provision allowing the Federal Board of Revenue (FBR) to waive the late return filing surcharge for individuals who submit a prescribed undertaking restricting future property purchases.
The amendment to the Income Tax Ordinance, 2001 offers eligible taxpayers a chance to avoid the surcharge imposed on late filing of income tax returns, provided they agree to refrain from acquiring any property for a specified period.
Six-Month Property Restriction Required
Under the newly introduced provision, the requirement to pay the late return filing surcharge will not apply to an individual who furnishes an undertaking before the Commissioner of Inland Revenue.
In the undertaking, the taxpayer must declare that they will not purchase, acquire, or obtain ownership or beneficial interest in any property for six months from the date the undertaking is submitted.
The declaration must be furnished in the form prescribed by the FBR.
Relief Linked to Compliance
The amendment is designed to provide relief to individuals who have failed to file their tax returns on time while encouraging future tax compliance.
Instead of immediately imposing the surcharge, the law allows qualifying individuals to obtain an exemption by voluntarily accepting temporary restrictions on acquiring immovable or movable property.
Tax practitioners believe the measure could encourage more non-filers and late filers to regularise their tax affairs without facing an immediate financial burden.
Part of Wider Tax Reforms
The relief comes as part of the government’s broader package of tax reforms introduced through the Finance Act, 2026. While the legislation contains several stringent enforcement measures—including enhanced banking data sharing, digital verification of tax information, and tougher penalties for false tax credit claims—it also includes targeted incentives aimed at improving voluntary compliance.
Officials expect the new provision to encourage more individuals to file overdue income tax returns, broaden the tax base, and increase documentation of the economy without relying solely on punitive measures.
However, taxpayers opting for the relief must strictly comply with the six-month restriction on acquiring property, as the undertaking becomes a legally binding declaration under the Income Tax Ordinance, 2001.
