FBR Uses AI to Check Tax Returns for Errors

ISLAMABAD: The Federal Board of Revenue (FBR) has expanded the use of artificial intelligence to check individual tax returns. The automated system can now detect factual and legal errors and discrepancies before starting any legal or penal action.

How the New System Works

Under the new mechanism, taxpayers will first be informed electronically about discrepancies found in their income tax returns. They will be allowed to clarify or fix them through a set procedure.

New Rules Notified Through SRO 2098 of 2026

The new procedures were notified through SRO 2098 of 2026, released on Wednesday. The rules are titled “38B. Procedure for electronic scrutiny and intimation of issues detected by the automated system”. These rules amend the Income Tax Rules 2002.

Cross-Matching of Tax Data

An important feature of the new arrangement is automated analysis and cross-matching of information available with tax authorities. The system will compare details declared in income tax returns with other available data and flag possible discrepancies for taxpayer clarification.

Notifications Through IRIS

The tax system will notify taxpayers about detected issues through an online advisory or advance intimation sent via IRIS. These notices may point out factual errors, legal mistakes, or discrepancies in tax records. The goal is to give taxpayers a chance to explain the issue, correct errors, or take necessary action before any legal or penalty proceedings begin.

The same system-generated advance intimation may also be issued by the Officer of Inland Revenue who has jurisdiction over the taxpayer.

Response Time for Taxpayers

The notice must clearly state the response period, which cannot be less than seven days. During this time, the taxpayer may give an explanation, correct the identified errors, or take other steps to resolve the discrepancies mentioned in the notice.

If the taxpayer does not respond within the specified period, a reminder will be issued. The reminder must give at least seven additional days for the taxpayer to respond.

Role of Inland Revenue Officer

Details of the issues or discrepancies identified by the system, the notices sent to the taxpayer, and any responses received will be shared with the Officer of Inland Revenue responsible for the taxpayer.

All notices issued, responses received, and actions taken will be recorded in the system’s dashboard for monitoring and reference.

The Inland Revenue officer will review the taxpayer’s response, if any, and assess the matter. Based on this review, the officer may take appropriate action under the relevant provisions of the Income Tax Ordinance 2001 and the rules made under it.

Published in Dawn, November 12th, 2026