Income Tax Audit in Pakistan (2026 Guide)
An income tax audit in Pakistan is a process where the Federal Board of Revenue checks your financial records, tax returns, and other documents to ensure that you have correctly reported your taxable income and followed Pakistan’s tax laws.
Many people think audits are only for businesses, but salaried individuals, freelancers, and professionals can also be selected if their financial records or tax returns do not match FBR standards. This guide will explain the audit process, required documents, penalties, and tips to stay compliant.
What is an Income Tax Audit?
An income tax audit is an official review by FBR to check that your tax filings are accurate. The main purposes of an audit are:
- To ensure compliance with Pakistan tax laws
- To detect errors or discrepancies in filed returns
- To identify areas of potential underreporting or risk
- To help taxpayers maintain proper records for future audits
Audits are usually triggered by risk profiling, random selection, or inconsistencies in your submitted tax returns.
Types of Income Tax Audits in Pakistan
FBR conducts several types of audits depending on the situation:
- Random Audit (Section 214C): Any filer can be selected randomly for audit.
- Audit due to Discrepancies: If your tax return does not match your bank transactions, expenses, or other records.
- Audit under Re-assessment (Section 122A): If FBR believes you have underreported income or claimed incorrect deductions.
- Field Audit: Auditor visits your office or business location to check documents.
- Office Audit: Audit is conducted at the FBR office using the documents you submit.
Each type has slightly different procedures, but the main steps remain the same.
Who Needs an Income Tax Audit?
FBR selects taxpayers for audits based on their profile. Common categories include:
- Businesses & Companies: Turnover of PKR 100 lakh or more
- Sole Proprietors & Professionals: Turnover above PKR 30–50 lakh depending on the type of business
- Non-Filers: People not on the Active Taxpayer List (ATL)
- Salaried Individuals or Freelancers: If returns are inconsistent with bank statements or other records
Being selected does not mean wrongdoing; it’s a routine process to ensure compliance.
Income Tax Audit Thresholds (2026 Updated)
| Taxpayer Type | Turnover Limit (PKR) | Audit Required? |
| Sole Proprietor | 50 lakh+ | Yes |
| Partnership / Company | 100 lakh+ | Yes |
| Professionals | 30 lakh+ | Yes |
Note: These limits are updated for the 2026 tax year.
Documents Required for Tax Audit
You should prepare the following documents for a smooth audit:
- Filed tax returns for the last 5 years
- Bank statements and reconciliations
- Sales and purchase invoices
- Financial statements and ledgers
- Utility bills, salary slips, and contracts
- Withholding tax certificates
Tip: Keep all documents organized to save time and avoid penalties.
FBR Income Tax Audit Process (Step-by-Step)
The audit process usually follows these steps:
- Audit Notice: FBR issues a formal notice selecting you for audit.
- Document Submission: You submit required documents through the IRIS portal or to the assigned officer.
- Verification & Queries: Auditor reviews your records and may ask questions or request clarifications.
- Audit Report Preparation: A detailed report is prepared under Section 177 or 214C.
- Final Findings: FBR shares results, any additional tax, or penalties if applicable.
Following these steps carefully ensures a smoother audit experience.
Penalties for Non-Compliance
Failing to comply with audit requirements can result in penalties:
- Late submission or incomplete documents may incur fines
- Maximum penalty depends on the section under which audit is conducted (Section 177 / 182)
- Example: Non-submission of records can lead to fines of up to PKR 100,000 or more
Always respond to FBR notices on time to avoid penalties.
Difference Between Tax Audit and Statutory Audit
| Feature | Tax Audit | Statutory Audit |
| Authority | FBR | SECP / Companies Act |
| Purpose | Verify tax compliance | Legal verification of financial statements |
| Trigger | Risk, random selection, discrepancies | Mandatory yearly for registered companies |
How to Prepare for an Income Tax Audit
- Maintain proper bookkeeping
- Ensure all bank reconciliations and ledgers are correct
- Hire a qualified tax advisor if needed
- Organize all supporting documents in advance
- Check ATL status and ensure Filer status is active
Common Reasons for Income Tax Audits
- Discrepancies in filed tax returns
- Large refund claims
- Inconsistencies with ATL
- High cash transactions or unusual expense claims
Post-Audit Compliance & Tax Planning
After the audit, you should:
- Maintain proper records for future audits
- Review your ATL and Filer status
- Plan taxes for the next financial year
- Resolve any objections or disputes promptly
FAQs
1. What triggers an income tax audit in Pakistan?
Random selection, return discrepancies, or being a non-filer can trigger an audit.
2. How long does an audit take?
Typically 1–3 months depending on the complexity and documents provided.
3. Can I appeal FBR audit findings?
Yes, you can submit objections or clarifications through the IRIS portal.
4. What documents are mandatory for an audit?
Tax returns, bank statements, invoices, financial statements, utility bills, and contracts.
5. What is Section 177 audit?
A routine audit under the Income Tax Ordinance 2001 where FBR verifies financial records.
Conclusion
Income tax audits in Pakistan are routine checks by FBR to ensure compliance. Proper preparation, organized documents, and understanding the process can reduce stress, prevent penalties, and ensure smooth compliance. By following this guide, individuals and businesses can confidently navigate the audit process in 2026.
