Section 154A final tax regime for IT/ITeS exporters — 0.25% with PSEB, 1% without. VERIFIED from FBR sources.
0.25% / 1% Final TaxVERIFIEDSection 154AExtended: June 30, 2026
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Section 154A — IT Export Tax Regime
VERIFIED from FBR sources
If you're in the IT/ITeS business and you export, Pakistan gives you one of the most generous tax deals in the world:
Section 154A, Second Schedule — Income Tax Ordinance 2001:
Income from IT and IT-enabled services (ITeS) exported from Pakistan is subject to a final tax on gross turnover received through proper banking channels.
⚠️ Correction: The correct provision is Section 154A (NOT Section 150(2B) as previously stated on this page). This has been verified from FBR sources.
What does "final tax" mean?
"Final" means that's it — no more tax on that income. You don't need to add it to your normal tax return and calculate a higher rate. The 0.25% or 1% is the complete and final tax obligation on your IT export income.
What qualifies as IT/ITeS exports?
Software development — custom apps, SaaS, mobile apps
IT consulting — technical advisory, architecture, DevOps
Web development & design — websites, e-commerce, UI/UX
BPO services — call centers, data entry, virtual assistants
IT training — online courses for foreign students
Cloud services — hosting, managed services for foreign clients
Freelance IT services — Upwork, Fiverr, direct contracts
Conditions for Final Tax Regime
Income tax return filed
Withholding statements filed (if you are a withholding agent)
Sales tax return filed if required under Federal/Provincial sales tax laws (Finance Act 2024 abolished this requirement for FTR claim)
No credit of foreign taxes paid allowed against this tax
Critical Condition: The income MUST be received in foreign exchange through proper banking channels (State Bank of Pakistan regulations). Cash, hawala, or informal transfers do NOT qualify.
How does the tax get collected?
The tax is collected through Withholding Tax (WHT) by the bank when the foreign remittance lands in your account. You'll see it on your bank statement as a deduction. In most cases, you don't even need to deposit it separately — the bank does it for you.
Example: You receive $10,000 from a US client. At PKR 280/$, that's Rs. 2,800,000.
With PSEB: Bank deducts 0.25% = Rs. 7,000 → You receive Rs. 2,793,000
Without PSEB: Bank deducts 1% = Rs. 28,000 → You receive Rs. 2,772,000
Fill the registration form with company/freelancer details
Attach: NTN, CNIC, SECP certificate (if company), bank certificate
PSEB verifies and issues registration
Share your PSEB certificate with your bank to ensure 0.25% WHT deduction
Pro tip: Banks sometimes default to 1% (no PSEB) if they don't have your PSEB certificate on file. Submit a copy to your branch manager to get the 0.25% rate.
How It Works in Practice
1. Invoice Client
Bill your foreign client in USD or foreign currency
2. Receive Payment
Funds land in your PKR account via proper banking channel
3. Bank Deducts 0.25%
Bank withholds tax and deposits to FBR
4. File Tax Return
Declare export income + WHT in annual return
Mixed Income: If you have both export income (0.25%/1% FTR) and domestic income (normal rate), they're treated separately. Your tax return will show two categories: "Final Tax — IT Exports" and "Normal Income." You only pay normal rates on the domestic portion.
How to File as an IT Exporter
Step-by-step filing process:
Ensure you're on ATL (Active Taxpayer List) — File on time to stay on the list
Fill the Wealth Statement — Declare assets, liabilities, and income
Declare IT Export Income — Under "Income from Business" → select the IT export category
Enter WHT credits — The 0.25%/1% deducted by banks should appear as a tax credit
Declare domestic income separately (if any) — This is taxed at normal rates
Submit return before deadline
Forms needed:
Form
Purpose
Who Files
Income Tax Return
Annual income declaration
All taxpayers
Wealth Statement
Assets & liabilities declaration
Companies & individuals (if income > Rs. 1M)
Statement of Assets
Details of owned assets
All
Annual Income Tax Return (Company)
Corporate return filing
Pvt Ltd companies
Super Tax — Section 4C
VERIFIED
Introduced in Finance Act 2022, the Super Tax is an additional tax on "imputable income" (progressive). It applies on a very high threshold — most IT exporters won't be affected.
Imputable Income (PKR)
Super Tax Rate
Up to 150 million
0%
150M – 200M
1%
200M – 250M
1.5%
250M – 300M
2.5%
300M – 350M
3.5%
350M – 400M
5.5%
400M – 500M
7.5%
Above 500M
10%
Does Super Tax affect IT exporters?
The math: "Imputable income" is your total income before exemptions. For IT exporters on 0.25% FTR, you'd need approximately Rs. 17.5 billion gross turnover to hit the first slab (150M imputable income ÷ 0.25% = 60B, but the calculation is more nuanced). For 1% FTR exporters, approximately Rs. 4.4 billion turnover. The vast majority of IT companies won't pay any super tax.
IT exporters are exempt from minimum tax under Section 113.
Clause (133), Part-I, Second Schedule of the Income Tax Ordinance 2001 provides that exports of computer software, IT Services or IT-enabled services are exempt from the minimum tax provisions of Section 113.
Additionally, since IT export income is already subject to a final tax (0.25%/1% under Section 154A) collected at source by banks, Section 113's minimum tax does not apply separately. However, if you have domestic income alongside exports, Section 113 may apply to the domestic portion.
Startup Tax Provision — 100% Tax Credit
VERIFIED
100% Tax Credit for IT Startups
Startups can claim a 100% tax credit (not exemption — credit against tax). This is available for:
Companies commenced on or after July 1, 2012
Technology-driven business
Registered with PSEB
Annual turnover < Rs. 100 million
Return + WHT statements + sales tax return filed
How long does the credit last?
The credit is available for the year of PSEB certification plus the following 2 years (3 years total).
Startups can also obtain an exemption certificate from WHT under Section 153/154/154A.
Freelancer Tax Treatment
VERIFIED
Freelancers receiving foreign remittance for IT/IT-enabled services fall under Section 154A (export of services):
With PSEB registration: 0.25% FTR
Without PSEB registration: 1% FTR
Freelancers are typically individuals — file individual income tax returns
Section 236Y: Payment through debit/credit card for foreign transactions: 5% (filer), 10% (non-filer). This is separate from the export tax and applies to card payments.
Filing Deadlines & Extensions
Taxpayer Type
Normal Deadline
Extended (Typical)
Companies
30 September
31 December (with extension)
Individuals (Salaried)
30 September
31 December
Individuals (Business)
30 September
31 December
Association of Persons (AOP)
30 September
31 December
WHT statements: Monthly (by 15th of following month)
Miss the deadline and you risk:
• Removal from ATL → higher WHT rates on ALL transactions
• Penalty: Rs. 1,000 to Rs. 40,000 for individuals, up to 2x tax for companies
• Default surcharge at KIBOR + 3% per annum
ATL Maintenance
The Active Taxpayer List (ATL) determines filer vs non-filer status. Non-filers pay roughly double WHT rates across all sections.
Property purchase/sale requires ATL status
Vehicle registration requires ATL status
Bank loan applications require ATL status
Government tenders require ATL status
ATL checklist:
✅ File your annual return before the deadline (30 Sep, typically extended to 31 Dec)
✅ Verify you appear on ATL at iris.fbr.gov.pk
✅ If you miss it, file immediately — ATL updates within 24-48 hours
IT Export Tax Calculator
Income Tax Calculator — IT Exports (Section 154A)
Tax Calculation
Gross Export IncomeRs. 20,000,000
Income Tax Rate0.25%
Income Tax PayableRs. 50,000
Super TaxRs. 0 (0% — below threshold)
Total Tax (approx.)Rs. 50,000
Super tax is calculated on imputable income. Most IT exporters won't hit the threshold. Section 154A extended till June 30, 2026.
Frequently Asked Questions
Yes! Individual freelancers exporting IT services also qualify under Section 154A, provided they are PSEB-registered and receive payments through proper banking channels. Without PSEB, freelancers pay 1%.
They're treated separately. Export income gets 0.25%/1% final tax. Domestic income is taxed at normal rates (29% corporate or individual slab rates, plus 6% WHT on IT services under Section 153). Your tax return will show both categories.
No. Since it's a "final tax" regime on gross turnover, you cannot claim deductions/expenses against IT export income. The 0.25%/1% is on the gross amount. This is the trade-off for the simplicity and low rate.
This usually happens because: (a) Your PSEB certificate isn't on file with the bank, or (b) you're a non-filer (double rate). Contact your branch manager with your PSEB certificate. If excess tax was deducted, you can claim a refund in your annual tax return.
Yes! Even if all your tax is collected by the bank, you must still file an annual income tax return. This is required to stay on ATL and declare other income/assets. One of the conditions for FTR under Section 154A is that the return must be filed.
The correct provision is Section 154A of the Income Tax Ordinance 2001, as listed in the Second Schedule. Some older references mention Section 150(2B), but the current applicable section is 154A. This has been verified from FBR sources and TaxPills.