The Federal Board of Revenue (FBR) does not just want your tax; it wants it on time. Miss the return deadline or pay short, and the Income Tax Ordinance 2001 layers several charges on top of the tax itself. Many people confuse these, assume the worst, or ignore a notice until it snowballs. This guide separates the three main charges - penalty, default surcharge and ATL surcharge - explains the section behind each, and shows how to bring the total down. For your headline liability first, use our income tax calculator.
Late-filing penalty (section 182)
The core penalty for not filing your return by the due date sits in section 182 of the Income Tax Ordinance 2001. It is charged at 0.1% of the tax payable for the year for each day of default, subject to a maximum of 50% of the tax payable. Crucially, a minimum applies even when your tax is small or nil:
| Taxpayer | Minimum late-filing penalty |
|---|---|
| Salaried (75%+ salary, under PKR 5M) | PKR 5,000 |
| Individual with taxable income up to PKR 800,000 | PKR 5,000 |
| Other individuals / general case | PKR 40,000 (or 0.1%/day if higher) |
So a salaried person with modest tax may only face PKR 5,000, while a business owner with real tax due can watch the daily 0.1% climb toward the 50% ceiling. Note that no penalty is legally valid unless the Commissioner passes a written order after giving you a hearing - a blanket demand without that process is challengeable.
Default surcharge (section 205)
Penalty punishes late filing. Default surcharge under section 205 is different: it compensates the state for late payment of tax, and it keeps accruing every day the tax stays unpaid. The current rate is 12% per annum, or KIBOR + 3% per annum, whichever is higher, applied to the outstanding amount from the date it fell due until it is cleared.
Default surcharge is not a fine you can argue away by explaining yourself - it is arithmetic on time and money owed. The only way to stop it growing is to pay the tax. Every extra week of delay literally adds to the bill.
The same logic runs through indirect tax: unpaid sales tax carries default surcharge, generally counted from the 16th day of the month following the due date. Recent 2026 case law has also limited the FBR's ability to charge surcharge for periods when recovery was stayed by a court - a technical but valuable point in disputes.
ATL surcharge to rejoin the filer list (section 182A)
Even after you pay the penalty and file, one more charge stands between you and filer status. Under section 182A, a person who files after the due date is kept off the Active Taxpayers List (ATL) until they pay a fixed ATL surcharge. Only then does your name appear on the list and the lower filer withholding rates apply.
| Taxpayer type | ATL surcharge (current) |
|---|---|
| Individual | PKR 1,000 |
| Association of Persons (AOP) | PKR 10,000 |
| Company | PKR 20,000 |
Heads-up: the Finance Act 2026-27 has proposed sharp increases to these figures (widely reported as up to PKR 25,000 for individuals and PKR 100,000 for companies), and the change has been contested by tax practitioners. Because this is in flux, confirm the live amount on the FBR portal or with an adviser before you pay. Staying on the ATL matters far beyond principle - see our filer vs non-filer guide for the real cost of being off it.
Sales tax and other penalties
The penalty regime is not limited to income tax. Under section 33 of the Sales Tax Act 1990, failing to file a monthly sales tax return attracts a penalty of PKR 10,000, reduced to PKR 200 per day where the return is filed within ten days of the due date. Miss two consecutive periods and you can be marked a non-active taxpayer - unable to issue tax invoices, claim input tax or clear imports.
| Default | Governing law | Typical charge |
|---|---|---|
| Late income tax return | Sec 182, Ordinance 2001 | 0.1%/day, max 50% (min PKR 5,000+) |
| Late payment of tax | Sec 205, Ordinance 2001 | 12% p.a. or KIBOR + 3% |
| Rejoining the ATL | Sec 182A, Ordinance 2001 | PKR 1,000 - 20,000 (proposed higher) |
| Late sales tax return | Sec 33, Sales Tax Act 1990 | PKR 10,000 (or PKR 200/day) |
Specific amounts move with each Finance Act and with your exact facts, so treat the table as a guide, not a quotation. Where figures matter to a decision, get them confirmed for your case.
How to minimise what you pay
You cannot always avoid a charge, but you can keep it small and stop it compounding:
- File now, even if late. The 0.1% daily penalty and the daily default surcharge only stop when you file and pay. A late return is always cheaper than a later one.
- Pay the tax before you argue. Default surcharge is pure arithmetic on time - clearing the principal stops it, and you can still contest a disputed penalty afterwards.
- Get onto the ATL. Paying a small section 182A surcharge to become a filer usually saves far more in reduced withholding on banking, property and vehicle transactions.
- Respond to notices. A section 182 penalty needs a written order after a hearing - engaging early is your chance to reduce or defeat it. See our guide to FBR tax notices under sections 114, 122 and 176.
- Appeal genuine errors. Wrongly computed penalties and surcharge can be challenged before the Commissioner (Appeals) and the Appellate Tribunal.
If you have missed a deadline or received a demand, our income tax return filing service and tax planning and advisory team can file, calculate the exact charges, and represent you if the numbers look wrong.
Frequently asked questions
What is the penalty for filing a return late?
Section 182 charges 0.1% of the tax payable per day of default, capped at 50% of the tax, with a minimum that starts at PKR 5,000 for salaried individuals and rises to PKR 40,000 in the general case.
What is default surcharge?
A charge under section 205 for paying tax late - 12% per annum or KIBOR + 3%, whichever is higher, accruing daily on unpaid tax until it is cleared.
How much is the ATL surcharge?
Currently PKR 1,000 for individuals, PKR 10,000 for AOPs and PKR 20,000 for companies under section 182A - though the 2026-27 budget proposes much higher figures, so confirm before paying.
Can I face a penalty and default surcharge together?
Yes. They punish different defaults - late filing versus late payment - so a taxpayer who files and pays late can be hit by both at the same time.
What is the penalty for a late sales tax return?
Section 33 of the Sales Tax Act 1990 sets PKR 10,000, reduced to PKR 200 per day if you file within ten days of the due date, with default surcharge on any unpaid output tax.
Can a penalty be waived?
A penalty is only valid after a written order and a hearing, and it can be contested in appeal. Paying the tax and filing promptly is the surest way to limit the total.