Keeping proper tax records is not just good practice—it is a legal requirement in Pakistan. Many taxpayers are unaware of how long they must retain documents, which can lead to serious issues during audits or investigations by the Federal Board of Revenue (FBR).
For tax year 2026, Section 174 of the Income Tax Ordinance, 2001 clearly defines the rules for record retention. This guide explains what records to keep, for how long, and why it matters.
📁 What Tax Records Must Be Maintained?
Under Section 174(1), every taxpayer must maintain in Pakistan:
• Books of accounts
• Invoices and receipts
• Bank statements
• Contracts and agreements
• Any documents supporting income, expenses, assets, or liabilities
These records must be available in a prescribed manner unless the Commissioner authorizes otherwise.
⚠ Why Proper Records Are Critical
According to Section 174(2):
👉 If you cannot produce evidence (such as receipts or documents) to support a deduction claim, the Commissioner may disallow or reduce that deduction.
This means:
• Your tax liability can increase
• Penalties or additional tax may be imposed
⏳ How Long Should You Keep Tax Records?
✅ Standard Rule
Taxpayers must retain all required records for:
🕒 Six (6) years after the end of the relevant tax year
🏛 What If a Case or Audit Is Ongoing?
If any proceeding is pending, records must be kept until the final decision, even if six years have already passed.
“Pending proceedings” include:
• Assessment or amended assessment
• Appeals and revisions
• References or petitions
• Prosecution cases
• Proceedings before an Alternative Dispute Resolution Committee (ADRC)
🚨 Special Rule for Undisclosed Income (Section 111)
The six-year limitation does NOT apply to records related to:
• Undisclosed income
• Unexplained assets or expenses
• Transactions falling under Section 111(2)(ii)
👉 These records may be required without any time limit.
🧮 What Does “Deduction” Mean?
For clarity, Section 174(4) defines “deduction” as any amount debited to:
• Trading account
• Manufacturing account
• Profit and loss account
• Receipts and expenses account
If you claim it, you must prove it.
💻 Electronic Tax Registers (ETR)
Under Section 174(5), the Commissioner may require certain taxpayers to:
• Install and use an Electronic Tax Register (ETR)
• Store and provide transaction-level data electronically
This is especially relevant for businesses and retailers.
✅ Key Takeaways for Taxpayers (2026)
• 📌 Keep tax records for at least 6 years
• ⚖ Retain records longer if any case is pending
• 🚫 No time limit for undisclosed income records
• 📉 Missing documents can lead to disallowed deductions
• 💡 Electronic record-keeping may be mandatory
🧠 Final Thought
Proper record retention protects you during audits, appeals, and assessments. If you are unsure whether a document should be kept, keep it—it’s always safer to retain records longer than required.
Staying compliant with Section 174 ensures peace of mind and smooth dealings with the FBR in tax year 2026 and beyond.
📌 Disclaimer
This article is for general informational purposes only and does not constitute tax, legal, or professional advice. Tax laws and their interpretation may change, and individual circumstances can vary. Readers are advised to consult a qualified tax professional or FBR guidelines before making any tax-related decisions.