The Federal Board of Revenue (FBR) issued a draft Statutory Regulatory Order (SRO) on October 6, 2026. This new draft notification offers a significant concession to non-filers who submit their income tax returns late, allowing them to gain active status without paying the standard surcharge fee. However, this relief comes with a critical legal condition that every taxpayer must understand before taking advantage of it.
This article provides a comprehensive breakdown of the newly proposed draft amendments, the mechanism of Form ATL-U, the mandatory six-month restriction on property transactions, the consequences of misrepresentation, and practical guidance on whether taxpayers should opt for this exemption or pay the statutory surcharge.
Background: Previous Surcharge vs. Current Surcharge
Previously, when a non-filer submitted an income tax return after the official deadline or extended due date, they were required to pay a surcharge to get their name included in the Active Taxpayer List (ATL).
- Previous Year: The surcharge amount ranged from Rs 1,000 to Rs 10,000 depending on the taxpayer category.
- Current Year: The surcharge amount has been increased to a range between Rs 25,000 and Rs 100,000.
Under the draft SRO issued on October 6, 2026, taxpayers who file late returns—even after the extended date—are granted a waiver from paying the Rs 25,000 surcharge while still becoming eligible for placement on the ATL.
Understanding Section 81B and Form ATL-U
A common misconception among taxpayers is that submitting a late return under this new rule automatically restores active status on the Active Taxpayer List. This is incorrect.
Under a newly added clause in sub-rule (2) of Section 81B of the Income Tax Rules, 2002, benefiting from this surcharge exemption requires an explicit submission:
- Mandatory Portal Requirement: Taxpayers must log into the IRIS web portal and submit an additional electronic form known as Form ATL-U.
- Nature of Form ATL-U: Form ATL-U serves as a formal undertaking and legal declaration by the taxpayer.
The 6-Month Property Transaction Restriction
The primary legal condition attached to submitting Form ATL-U without paying the late filing surcharge is a direct restriction on real estate activities.
- The Restriction: By submitting Form ATL-U without paying the surcharge, the taxpayer is legally restricted from buying or selling any property for a period of six months.
- Effective Timeline: The 6-month restriction does not begin from the start of the financial year or the tax filing deadline. Instead, it begins strictly from the exact date on which Form ATL-U is submitted on the IRIS portal.
Form ATL-U Information Requirements
When filling out Form ATL-U, the FBR requires six key pieces of information from the taxpayer:
- Biodata (Taxpayer Name and CNIC/NTN number)
- Relevant Tax Year (e.g., 2025, 2026, or 2027)
- Date of Income Tax Return Filing
- Date of Acknowledgment Receipt
- Date of Undertaking / Form Submission
Upon submission, formal electronic approval is processed under Rule 73.
Strategic Choice: Exemption vs. Paying the Surcharge
Taxpayers and their consultants must evaluate their immediate financial plans before submitting Form ATL-U.
- If You Plan to Buy or Sell Property: If you intend to engage in property purchase or sale transactions within the next 6 months, paying the Rs 25,000 surcharge under Section 182A, sub-section (2C) is recommended. In the context of large real estate investments, paying the surcharge avoids the statutory 6-month restriction on property transactions.
- If You Have No Real Estate Plans: If you have no intention of buying or selling property during the next 6 months, you can submit Form ATL-U without paying the Rs 25,000 surcharge to obtain active taxpayer benefits.
Legal Authority, Verification, and Penalties for Violation
Some taxpayers may assume that property registry offices will not be aware of whether Form ATL-U was submitted. However, the SRO grants the FBR broad legal authority to enforce compliance:
- Inquiry Authority: FBR has full legal authority to conduct inquiries regarding property transactions, obtain transaction data directly from sub-registrars and land records, and collect information from any other reliable source.
- Electronic Notice via IRIS: If FBR discovers a property transaction made during the 6-month restriction period following a Form ATL-U submission, an electronic notice will be issued to the taxpayer’s IRIS portal requesting justification.
- Cancellation and Reversal of Benefits: If the taxpayer fails to justify the transaction, Form ATL-U will be canceled retroactively to its original submission date. Consequently, all filer benefits enjoyed during that period will be reversed, and the taxpayer will be subjected to 100% non-filer tax rates.
- Criminal Proceedings: Submitting a false undertaking or violating the declaration can result in formal legal action and criminal proceedings initiated by the FBR against the taxpayer.
Current Status: Draft Amendments
It is important to note that these provisions currently exist as draft amendments and are not yet finalized.
The FBR has invited comments, feedback, and suggestions from tax bars, legal practitioners, and consultants within a 7-day period. The formal notification and implementation will take effect after this feedback period is completed.
Frequently Asked Questions (FAQs)
Q1: What relief does the FBR draft SRO of October 6, 2026, provide to late filers? Answer: The draft SRO allows late filers to get listed on the Active Taxpayer List (ATL) without paying the standard Rs 25,000 surcharge, provided they submit Form ATL-U.
Q2: Will a late income tax return automatically place my name on the Active Taxpayer List? Answer: No. To claim the surcharge exemption and gain ATL status, you must explicitly log into the IRIS portal and submit Form ATL-U under Section 81B of the Income Tax Rules, 2002.
Q3: What restriction is imposed if I submit Form ATL-U without paying the surcharge? Answer: Submitting Form ATL-U imposes a mandatory 6-month restriction on buying or selling any property, starting from the exact date the form is submitted.
Q4: How can I buy or sell property immediately if I file my return late? Answer: If you plan to buy or sell property within 6 months, you should pay the surcharge under Section 182A, sub-section (2C) instead of opting for the Form ATL-U exemption, allowing you to execute transactions without restrictions.
Q5: What happens if someone sells or buys property despite submitting Form ATL-U? Answer: FBR can verify land records and sub-registrar data. If a violation is found, FBR will issue an IRIS notice. If unjustified, Form ATL-U will be canceled retroactively, all filer benefits will be reversed to 100% non-filer tax rates, and legal or criminal proceedings may be initiated for submitting a false declaration.
Conclusion
The FBR’s draft SRO of October 6, 2026, introduces a practical route for late filers to regain Active Taxpayer status without incurring an immediate Rs 25,000 surcharge. However, this benefit requires an explicit undertaking through Form ATL-U and legally restricts the taxpayer from engaging in property transactions for six months from the date of submission. Taxpayers should carefully review their immediate financial plans with their tax consultants before choosing between submitting Form ATL-U or paying the statutory surcharge under Section 182A(2C).
Professional Contact & Consultancy Services
For professional guidance and services regarding property disputes, Income Tax, Sales Tax, SECP, FBR matters, company registration, NTN registration, and refund claims, feel free to reach out to our team of Lawyers, Chartered Accountants, Computer Engineers, and AI Experts:
Ch. Muhammad Saeed, Advocate High Court Senior Member, High Court Bar Association Lahore
- Phone: 0341-1259762
- Email: msaeedadv86@gmail.com
