Islamabad: The Federal Government has introduced a series of significant tax relief measures and policy reforms in the Federal Budget 2026-27 aimed at accelerating the growth of Pakistan’s information technology, telecommunications, and startup sectors.
Presented by Finance Minister Muhammad Aurangzeb, the Finance Bill 2026 seeks to strengthen Pakistan’s digital economy by reducing business costs, promoting investment, supporting technology exports, and expanding digital infrastructure across the country.
IT Exports Reach $4.5 Billion
While presenting the budget, the finance minister highlighted that Pakistan’s IT exports reached $4.5 billion during FY2025-26, reflecting more than 20 percent annual growth and underscoring the sector’s increasing contribution to the national economy.
0.25% Tax Rate for IT Exports Extended Until 2029
One of the most important measures announced for the technology sector is the extension of the 0.25 percent concessional tax rate on IT and IT-enabled services exports under Section 154A.
The reduced tax regime, which was scheduled to expire on June 30, 2026, has now been extended until Tax Year 2029, providing long-term tax certainty for software houses, freelancers, and technology exporters.
Advance Tax on International Digital Payments Slashed by 90%
The government has also reduced the advance tax on foreign payments made through credit cards, debit cards, and prepaid cards from 5 percent to 0.5 percent.
The move is expected to significantly reduce costs associated with international software subscriptions, cloud computing services, SaaS platforms, and other digital tools used by businesses, freelancers, and consumers.
Relief for Salaried Professionals
The budget offers substantial relief to salaried individuals by increasing the income threshold for the highest 35 percent tax slab from Rs. 4.1 million to Rs. 7 million annually.
Additionally, the surcharge applicable to higher-income salaried taxpayers has been abolished, further reducing the tax burden on professionals working in the technology and corporate sectors.
Tax Credit for Digital Integration
To encourage digitization and tax compliance, the government has introduced a 10 percent tax credit for FBR system integration. The incentive is expected to create opportunities for software developers, ERP providers, and system integration companies assisting businesses in connecting with government digital platforms.
Telecom Sector Receives Infrastructure Support
The Finance Bill continues the 0 percent customs duty on submarine cable landing station equipment, facilitating investment in international connectivity infrastructure, cloud services, data centers, and broadband expansion.
The government has also maintained the zero customs duty on smartphones, ensuring continued affordability of smart devices.
In a major relief measure for low-income consumers, the existing Rs. 250 customs duty on feature phones has been abolished, making basic mobile connectivity more affordable nationwide.
NTC Exempted from Withholding Tax
The budget exempts the National Telecommunications Corporation (NTC) from withholding tax under Section 153, a step expected to improve liquidity and support investment in public-sector telecommunications infrastructure.
Startup Ecosystem Receives Major Tax Incentives
The Finance Bill 2026 introduces key reforms aimed at addressing long-standing tax challenges faced by startups.
Under Clause 43F, startups have been exempted from withholding tax under Section 153, enabling them to receive full customer payments without facing delays associated with tax refunds.
The government has also restored tax pass-through treatment for Venture Capital (VC) funds under Clause 57(2), a move expected to improve access to investment financing for emerging businesses.
Super Tax Reduced for Businesses
The budget abolishes Super Tax for companies earning less than Rs. 500 million annually.
For larger businesses earning above the threshold, the Super Tax rate has been reduced from 10 percent to 8 percent, providing additional resources for expansion, innovation, recruitment, and infrastructure development.
Capital Value Tax on Foreign Assets Abolished
In an effort to encourage overseas Pakistanis to invest in the country, the government has abolished the Capital Value Tax (CVT) on foreign movable and immovable assets owned by resident Pakistanis.
The measure is expected to attract diaspora investment and improve capital inflows into Pakistan’s economy.
Government Calls Budget a Step Toward Digital Transformation
Federal Minister for IT and Telecom Shaza Fatima Khawaja welcomed the reforms, describing the budget as a strategic step toward building a digitally empowered Pakistan.
According to the Ministry of IT and Telecom, the measures introduced in the budget address several structural barriers that have historically constrained the growth of Pakistan’s digital economy, including taxation issues, investment challenges, infrastructure costs, and access to venture capital.
Industry stakeholders believe that the combination of tax relief, startup incentives, improved digital infrastructure, and export support could further accelerate growth in Pakistan’s technology sector, create employment opportunities, and strengthen the country’s position as a regional digital hub.
