ISLAMABAD: The Federal Board of Revenue (FBR) may arrest income tax return filers and non-filers suspected of concealing income that results in substantial tax evasion during tax year 2027.
Under Section 203B of the Income Tax Ordinance, 2001, the FBR has outlined the circumstances in which taxpayers may face arrest and prosecution following an audit and subsequent tax assessment.
The Income Tax Ordinance, updated up to June 30, 2026, covers tax year 2027, which runs from July 1, 2026, to June 30, 2027.
Arrest thresholds for filers and non-filers
According to Section 203B, a taxpayer may be arrested where material evidence obtained through an audit establishes concealment of income, resulting in unpaid tax of Rs100 million or more for a filer and Rs25 million or more for a non-filer.
The provision applies where an assessment has been made or amended under Section 121 or Section 122 of the ordinance, following an audit conducted under Section 177(8), read with Section 214C.
However, an arrest cannot be made solely on the basis of an audit observation. The assessing officer must record a finding that the taxpayer has committed the offence of concealing income, and prior written approval must be obtained from a designated committee.
Finance minister-led committee to approve arrests
The committee responsible for approving arrests comprises the Minister for Finance and Revenue, the FBR chairman and the board’s senior-most member.
All arrests under the ordinance must be carried out in accordance with the relevant provisions of the Code of Criminal Procedure, 1898.
Companies and directors may also face action
Section 203B also provides for the arrest of directors or officers of a company suspected of concealing income or committing another prosecutable tax offence, where an authorised officer has reason to believe they were personally responsible for the actions contributing to the offence.
The arrest of a director or officer does not absolve the company of its liability to pay outstanding tax, default surcharge and penalties.
Provision for compounding tax offences
The ordinance also allows the Chief Commissioner, with prior approval of the FBR, to compound an offence before or after recovery proceedings have been initiated.
This option is conditional upon payment of the outstanding tax, default surcharge and penalty determined under the ordinance.
The provisions establish a legal framework for pursuing serious cases of income concealment while setting financial thresholds and approval requirements for arrests.
