What is the penalty if I do not keep proper business records or issue invoices?

What does the law say?

Section 174 of the Income Tax Ordinance, 2001 requires every taxpayer to keep prescribed accounts, documents and records in Pakistan, and Chapter VII of the Income Tax Rules, 2002 sets out what those are, including numbered cash memos or invoices for sales. Two separate provisions deal with failures.

Section 182: penalties. Section 182(1) has a table of offences and penalties. A penalty under it applies in addition to, not instead of, any other punishment under the Ordinance or another law. The entries that matter most to a small business are:

Serial number	Offence	Penalty	Linked provision
2	Failing to issue a cash memo, invoice or receipt when required under the Ordinance or rules	Rs. 5,000 or three per cent of the amount of the tax involved, whichever is higher	Section 174 and Chapter VII of the Income Tax Rules
7	Failing to maintain records required under the Ordinance or rules	Rs. 10,000 or five per cent of the amount of tax on this income, whichever is higher	Section 174, among others
2A	Failing to install, use or maintain an electronic resource the Board has required under section 174(5), or tampering with it	One per cent of turnover or Rs. 1,000,000 for the first default, whichever is higher, and Rs. 2,000,000 for every subsequent quarterly default	Section 174(5)

Serial number 2A was inserted by the Finance Act, 2026.

Section 193: prosecution. A person who fails to maintain records as required commits an offence. On conviction, a deliberate failure is punishable with a fine not exceeding Rs. 50,000, imprisonment for a term not exceeding two years, or both. In any other case the punishment is a fine not exceeding Rs. 50,000.

How does it work in practice?

A penalty under section 182 is not automatic. Section 182(2) says none is payable unless the Commissioner, the Commissioner (Appeals) or the Appellate Tribunal passes a written order after giving the person a chance to be heard. The same sub-section lets a taxpayer who admits the default pay the penalty voluntarily, and its explanation says mens rea (intention) does not need to be established. Section 182(4) reduces the penalty if the tax on which it was based is later reduced.

Section 174(2) adds a separate consequence that is not a penalty: the Commissioner may disallow or reduce a claimed deduction if you cannot, without reasonable cause, produce a receipt or other evidence for it. That raises the taxable income, and so the tax, on top of any penalty.

Section 193 is a criminal provision. It works through prosecution and conviction, not through an order of the Commissioner.

Worked example (illustrative figures)

Shazia runs a cosmetics shop in Hyderabad. During an audit for tax year 2027, the Commissioner finds she kept no daily record or vouchers, and issued no sale memos for part of the year.

Records penalty under serial number 7:

1. Assume the tax on the income concerned is Rs. 140,000.
2. Five per cent of Rs. 140,000 = Rs. 7,000.
3. The higher of Rs. 10,000 and Rs. 7,000 is Rs. 10,000.

Invoice penalty under serial number 2:

4. Assume the tax involved in the sales made without memos is Rs. 220,000.
5. Three per cent of Rs. 220,000 = Rs. 6,600.
6. The higher of Rs. 5,000 and Rs. 6,600 is Rs. 6,600.

If both are imposed by written orders, the total is Rs. 10,000 + Rs. 6,600 = Rs. 16,600. Any expenses she could not support with evidence may also be disallowed under section 174(2), which increases her tax separately.

What if…?

What if my tax is small? The fixed amounts are floors. Even where five per cent or three per cent of the tax works out lower, the table charges the higher figure, so the minimum is Rs. 10,000 for records and Rs. 5,000 for invoices.

What if the Board has not notified my trade under section 174(5)? Serial number 2A applies only to a person “having been required by the Board” under section 174(5). Without such a requirement, that entry does not reach you.

What if the failure was a genuine mistake? Section 193 separates deliberate failures, which can bring imprisonment, from other cases, which carry a fine only. The section 182 penalty does not depend on intention, because of the explanation to section 182(2).

Common mistakes

• Reading “tax involved” as turnover. The percentages in serial numbers 2 and 7 are of tax, not of sales. The Ordinance does not define “tax involved” or “tax on this income” in the table itself, so how the figure is worked out in a given case is for the order to state.
• Thinking the penalty replaces tax. Section 182(1) says the penalty is in addition to any other punishment, and disallowed expenses under section 174(2) still increase the tax due.
• Assuming the penalty is final once charged. Section 182(4) reduces it if the underlying tax is later reduced by an order.

What to check in the official text

The table in section 182(1) does not reproduce cleanly in the site’s extracted text, so read serial numbers 2, 2A and 7 in the official PDF. Read section 182(2) to (4) for the procedure, section 193 for prosecution, and section 174 for the underlying duty. Check whether the Board has issued any notification under section 174(5) for your trade; such notifications are not in this corpus.