The Federal Board of Revenue (FBR) has expanded its use of artificial intelligence to check individual income tax returns for discrepancies. Taxpayers will receive an electronic alert through IRIS if the system spots a potential issue. They will have at least seven days to explain the difference or correct an error before the FBR moves to legal or penalty proceedings.
The FBR released SRO 2098(I)/2026 on Wednesday, November 11, to amend the Income Tax Rules, 2002. The notification adds a rule titled “38B. Procedure for electronic scrutiny and intimation of issues detected by the automated system”. The procedure covers returns that the FBR processes under Section 120(2A) of the Income Tax Ordinance, 2001.
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The FBR will use its automated risk management system to scrutinise returns for tax year 2026. The system will compare information that taxpayers declare in their returns with other records available to the tax authorities. It can flag factual errors, legal mistakes and discrepancies between records. The rule also provides for a Change Request Form to implement the data checks and electronic communications.
How FBR tax return notices will work in IRIS
The system can send an online advisory or an advance intimation through IRIS. The Officer of Inland Revenue with jurisdiction over the taxpayer can also issue the same system-generated advance intimation. The notice will identify the issue and must clearly state the deadline for a response.
During that period, taxpayers can explain why the figures differ, correct a mistake or take other steps to address the issue. If a taxpayer misses the initial deadline, the system will send a reminder. That reminder must allow at least seven additional days for a reply.
IRIS already handles requests to revise filed income tax returns. The FBR’s filing guidance says taxpayers can seek a revision within five years of the original filing to correct an omission or inaccurate statement. They apply through IRIS and can submit the revised return once the FBR approves the application.
Inland Revenue officers will review flagged returns
The officer responsible for the taxpayer will receive details of the discrepancies, the notices and any replies. The system will log every notice, response and subsequent action in a dedicated dashboard. Officers can use that record to monitor cases and check what happened at each stage.
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The officer will review any explanation or correction the taxpayer provides. If the taxpayer stays silent after the reminder, the officer can assess the case without a reply. The officer will then decide whether the case warrants further action under the Income Tax Ordinance, 2001, and its accompanying rules. The first step for a flagged return is therefore an IRIS alert that gives the filer a chance to address the specific issue.
