Sole proprietors in Pakistan - shop owners, traders, freelancers, consultants, contractors - are required to file an annual income tax return declaring all business income. Unlike salaried employees, sole proprietors must also maintain basic accounts and file their business income under the "business" category on FBR IRIS. Kamboh Associates handles sole proprietor tax returns from Rs 5,000.
How a sole proprietor files an income tax return in Pakistan 2026: profit computation, records under section 174, separate business account and fees. NTN registration from Rs. 2,000.
What is a Sole Proprietor for Tax Purposes?
A sole proprietor is any individual running a business in their own name without incorporating a company or forming a partnership. This includes: shop owners, traders, doctors running clinics, lawyers in solo practice, architects, consultants, contractors, and freelancers. The business income and personal income are treated as one for tax purposes.
Important: If you run a business and have not registered an NTN, FBR can issue notices based on utility bills, rent agreements, bank accounts, and business activity data. Register your NTN and file proactively to avoid penalties.
Tax Obligations for Sole Proprietors
- NTN Registration - Register on FBR IRIS as an individual with business income
- Annual Income Tax Return - Declare gross business revenue, expenses, and net profit by 30 September
- Wealth Statement - Declare all personal and business assets
- Sales Tax Registration - Required if annual turnover exceeds Rs 10 million
- Withholding Tax - Deduct and deposit WHT if you make payments to suppliers, contractors, or service providers above threshold
- Advance Tax - Pay quarterly advance tax if your income crosses the threshold in section 147
Our Services for Sole Proprietors
- NTN registration and profile setup
- Annual business income tax return
- Wealth statement preparation
- sales tax registration (STRN) and monthly filing
- WHT monthly return filing
- FBR notice response
How a Sole Proprietor's Tax Is Worked Out
- Start from total sales or fees for the year (1 July to 30 June).
- Subtract the cost of goods sold, such as purchases adjusted for opening and closing stock.
- Subtract business expenses: rent, salaries, utilities, transport, repairs and depreciation on business assets.
- The result is business profit, which is added to any other income such as rent or salary.
- Tax is calculated on the total using the slab rates for individuals with business income, which differ from the salaried slabs.
- Tax deducted at source on sales, electricity bills and bank profit is subtracted.
Records That Satisfy FBR
Section 174 requires taxpayers to keep records that support their return. For a small sole proprietor this means:
- a sales register or copies of invoices;
- purchase bills and supplier details;
- bank statements for the business account;
- salary sheets if staff are employed;
- a year-end stock list for traders.
Records should be kept for at least six years after the tax year.
Separating Business and Personal Money
Using one bank account for both business and household spending is the most common reason sole proprietors struggle to explain their deposits. A separate business account, even a simple current account, makes the profit computation and the wealth statement much easier.
Fees
Sole proprietor returns are Rs 5,000, NTN registration Rs 2,000 and monthly withholding statements Rs 3,000, per our pricing page.
Frequently Asked Questions
Do sole proprietors use the salaried tax slabs?
No. Individuals with business income use the non-salaried slab rates, which are different from the salaried slabs.
How long should a sole proprietor keep business records?
At least six years after the end of the tax year, as required under section 174.
What expenses can a sole proprietor deduct from business income?
Allowable deductions include: rent, salaries paid to employees (with WHT deducted), utilities, vehicle running expenses, depreciation on business assets, professional fees, and other genuinely incurred business expenses. Personal expenses are not deductible.
Do I need to maintain accounts as a sole proprietor?
You must maintain basic business records: revenue records, expense receipts, and bank statements. FBR can ask to inspect records if a notice is issued. A simple Excel sheet is acceptable for small businesses; larger businesses may need formal accounts.
Sole Proprietor Tax Return - Handled Professionally
WhatsApp your CNIC and business details to 0328-4675162. We handle complete FBR compliance for your business.