Karachi, January 2026 – The Federal Board of Revenue (FBR) selects taxpayers for sales tax audits under Rule 44A of Sales Tax Rules, 2006, updated for tax year 2026. This rule outlines a transparent selection and audit process using a combination of computerized random selection and parametric risk analysis.
This guide explains the audit selection criteria, procedures, and what taxpayers should expect.
What is Rule 44A?
Rule 44A provides the framework for:
• Selecting taxpayers for audit under Section 72B of the Sales Tax Act, 1990
• Conducting audits using a computerized ballot system and risk-based parameters
• Ensuring transparency and fairness in the audit selection process
Step 1: Data Collection for Audit Selection
FBR uses all sales tax returns filed, both electronically (e-filed) and manually filed, as the base dataset for selecting audit cases.
Key Steps in Data Preparation:
1. Exclude Certain Cases:
o FBR publishes the list of exclusions on its web portal annually.
o Excluded cases are removed from the selection dataset.
2. Use Remaining Data for Ballot:
o Only NTNs (National Tax Numbers) and CNICs of eligible filers are considered.
Step 2: Selection via Computer Ballot
FBR uses a computerized ballot system to select audit cases, ensuring fairness and transparency.
Computer Ballot Features:
| Feature | Description |
| Random Selection | Cases selected randomly as per predetermined percentage published on FBR portal. |
| Parametric Selection | Cases selected based on risk parameters, including financial ratios, compliance history, losses, or refunds beyond thresholds. |
| Transparency | Balloting is conducted in the presence of Chambers of Commerce and Tax Bar Association representatives. |
| Communication | Selected NTNs/CNICs are shared with the Regional Tax Offices (RTOs) and Large Taxpayer Offices (LTOs). |
Step 3: Parametric Audit Selection
FBR may use risk-based parameters for selecting taxpayers. These include:
• Financial ratios compared to historical data
• Industry, sector, or national benchmarks
• Refunds or losses exceeding thresholds
• Compliance history
This ensures that audits focus on high-risk taxpayers, maintaining fairness for compliant businesses.
Step 4: Notification to Taxpayers
Once selected, taxpayers receive an audit intimation letter from the Commissioner Inland Revenue.
Letter Includes:
1. Tax section under which selection is made
2. Tax period of audit
3. Mode of selection – random or parametric
4. Compliance requirements:
o Books of accounts
o Supporting documents
o Computerized data or attested hard copies
Step 5: Conduct of Audit
Auditors examine:
• Books of accounts
• Computerized data
• Supporting documents
If discrepancies are found:
1. Taxpayer is issued a preliminary audit report
2. Taxpayer provides explanations or clarifications
3. If explanations are unsatisfactory, a notice under Section 11(5) is issued, followed by a tax assessment order
FAQs – FBR Audit Selection 2026
Q1: Can all taxpayers be audited?
A1: Only those not excluded by FBR’s annual list are eligible for audit.
Q2: How does FBR ensure fairness in selection?
A2: Through computerized balloting and transparent parametric selection, supervised by industry and tax representatives.
Q3: What documents should I keep ready?
A3: Books of accounts, tax invoices, monthly returns, computerized records, and supporting documents.
Q4: How will I know if I am selected?
A4: FBR will send an audit intimation letter specifying tax periods, selection mode, and compliance requirements.
Key Takeaways
• FBR uses a structured, transparent process combining random and parametric selection.
• Risk-based parameters focus audits on high-risk cases.
• Compliance and accurate record-keeping reduce audit risks.
✅ Pro Tip: Keep all financial and tax records updated digitally. It makes audits faster and reduces the chance of disputes.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Businesses should consult the FBR or a qualified tax professional for guidance.