IT export tax in Pakistan: section 154A, PSEB, and the 0.25 percent rate

Exports of IT and IT enabled services from Pakistan are taxed under section 154A of the Income Tax Ordinance 2001, which puts the obligation on the bank: the authorised dealer in foreign exchange deducts at the time the proceeds are realised. Division IVA of Part III of the First Schedule sets two rates, and the lower one applies where the exporter is registered with the Pakistan Software Export Board. Where the section 154A(2) conditions are met, that deduction is a final tax.

This page sets out what the regime actually is today, what it replaced, and the conditions attached to it. Every claim is cited to the Income Tax Ordinance 2001 or to the Schedules. If you are an individual rather than a company, the companion page is tax for freelancers in Pakistan.

Three regimes in eighteen months

Understanding the sequence is the fastest way to recognise stale advice when you meet it.

1. Outright exemption. Clause (133) of Part I of the Second Schedule exempted income from exports of computer software, IT services or IT enabled services up to a period ending on 30 June 2025, subject to a proviso that eighty per cent of the export proceeds be brought into Pakistan in foreign exchange through normal banking channels. Clause (133) was omitted by the Finance Act 2021.
2. A tax credit instead. Section 65F was inserted by the Finance Act 2021, and its clause (c) gave a credit in respect of income from exports of computer software, IT services or IT enabled services as defined in clauses (30AD) and (30AE) of section 2, again up to 30 June 2025 and again with the eighty per cent repatriation proviso. Clause (c) of section 65F was omitted by the Finance Act 2022.
3. A final tax regime. Section 154A, headed "Export of Services", was inserted by the Finance Act 2021 and is what governs today.

What counts as an IT service or an IT enabled service

These are defined terms, and unusually for tax definitions they are drawn generously. Both were inserted into section 2 by the Finance Act 2021, and the Finance Act 2022 added the words "but not limited to" to each, which converted them from closed lists into illustrative ones.

Under section 2(30AD), Information Technology services include but are not limited to software development, software maintenance, system integration, web design, web development, web hosting and network design.

Under section 2(30AE), IT enabled services include but are not limited to inbound or outbound call centres, medical transcription, remote monitoring, graphics design, accounting services, Human Resource services, telemedicine centres, data entry operations, cloud computing services, data storage services, locally produced television programs and insurance claims processing.

Two things follow. First, the second list is much broader than "technology" in the ordinary sense: remote accounting and remote HR work are inside it by name. Second, because both lists are open ended, an activity that is genuinely of the same character as the listed ones is not excluded merely by being absent from the list. That is a real argument to have available, though it is one to make with your consultant rather than to assume.

How section 154A works mechanically

Section 154A does not ask you to compute anything at the point of earning. It puts the obligation on the bank. The section provides that every authorised dealer in foreign exchange shall, at the time of realisation of foreign exchange proceeds, deduct tax from the proceeds at the rates in Division IVA of Part III of the First Schedule.

The categories in subsection (1) are wider than software:

• (a) exports of computer software or IT services or IT enabled services, where the exporter is registered with and duly certified by the Pakistan Software Export Board;
• (b) services or technical services rendered outside Pakistan or exported from Pakistan;
• (c) royalty, commission or fees derived by a resident company from a foreign enterprise for the use outside Pakistan of a patent, invention, model, design, secret process or formula or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill;
• (d) construction contracts executed outside Pakistan, and (da) foreign commission due to an indenting commission agent; and
• (e) other services rendered outside Pakistan as notified by the Board from time to time.

Clause (b) is the catch all, and it matters because it means the regime is not confined to the technology sector. Engineering consultancy, design work and professional services billed abroad sit inside section 154A even where nothing about them is an IT service.

Two further subsections are worth noting. Subsection (5) requires the Board, in consultation with the State Bank of Pakistan, to prescribe the mode, manner and procedure of payment of tax under the section, which is why the operational detail lives with your bank rather than in the statute. Subsection (6) gives the Board power to include or exclude certain services from the section, so the perimeter can move by notification.

The PSEB condition, and what it is actually worth

Division IVA of Part III of the First Schedule sets two rates:

• Export proceeds of computer software, IT services or IT enabled services by persons registered with the Pakistan Software Export Board: 0.25 percent of proceeds.
• Any other case: 1 percent of proceeds.

Read against clause (1)(a), the position is clear enough. PSEB registration is not a nice to have or a credibility exercise as far as the Ordinance is concerned. It is the statutory condition that moves you from the 1 percent line to the 0.25 percent line, and the section is specific that the exporter must be registered with and duly certified by PSEB, not merely known to it.

The concessionary rate was extended this year. The 0.25 percent entry carries its own expiry written into the Schedule, expressed as applying for tax years 2024 up to a stated final tax year. That end point was tax year 2026. The Finance Act 2026 substituted it, and the rate now runs up to tax year 2029. FBR's consolidated Ordinance records the substitution in the footnote to the Division. Guidance written before July 2026 that warns the concession is about to lapse was correct at the time and is no longer.

Note also the tense. The section says registered and duly certified, in the present tense, so what matters is that the registration is live at the moment the proceeds are realised, not that you registered at some point. A lapsed registration moves you to the 1 percent line for realisations after it lapsed.

One practical note that catches people searching: PSEB now operates under the Tech Destination brand, and the old pseb.org.pk address redirects there. It runs categories for companies, freelancers and call centres, and sets its own fee and renewal terms, which it publishes. Get the current requirements from PSEB rather than from a tax blog, because the fee and renewal figures circulating secondhand disagree with each other.

The uplift that does not apply

Here is something genuinely valuable that we have seen almost universally reported wrongly, including in one of FBR's own rate cards.

Normally, tax deducted from a person not on the Active Taxpayer List is increased by one hundred percent under Rule 1 of the Tenth Schedule. On that basis a great deal of published material states that a non filer IT exporter pays 0.5 percent instead of 0.25 percent, or 2 percent instead of 1 percent.

This does not make filing optional. Section 154A(2)(a) still requires the return for the tax to be final, and the Active Taxpayer List still governs everything else you do. But the deduction on your export proceeds is not doubled by being off the list, and if a bank has applied an uplift to your remittance, Rule 10(ca) is the provision to point at.

The conditions that make the tax final

This is the part that gets missed, and it is the part that turns a good outcome into a bad one.

Section 154A(2) says the tax deducted shall be a final tax on the income arising from those transactions, but only upon fulfilment of the following conditions:

1. the return has been filed;
2. withholding tax statements for the relevant tax year have been filed, if required under the Ordinance;
3. sales tax returns under federal or provincial laws have been filed, if required under the law; and
4. no credit for foreign taxes paid shall be allowed.

Condition one does most of the damage in practice. Exporters see the deduction on the bank advice, conclude the tax has been dealt with, and never file. On the statute as written, the deduction is only final once the return is in. Without a return you have paid the withholding and still carry an open liability computed under the ordinary rules, which for a profitable exporter is very much larger than 0.25 percent of proceeds.

Condition three has a proviso that is a genuine and underreported concession: it does not apply to an exporter within clause (1)(a). A PSEB registered exporter of software, IT services or IT enabled services therefore does not need to have filed sales tax returns in order to obtain final tax treatment. That is a second, separate benefit of PSEB registration alongside the rate.

Condition four is a genuine cost and deserves to be weighed rather than skimmed. If a foreign client's jurisdiction withholds tax on the payment to you, the final tax regime gives you no credit for it. For exporters facing meaningful foreign withholding, that denial can outweigh the low headline rate.

When you would deliberately step outside the regime

Section 154A(3) provides that the finality in subsection (2) does not apply to a person who does not fulfil the conditions or who opts not to be subject to final taxation, and the proviso requires the option to be exercised every year at the time of filing the return under section 114.

Opting out means computing tax on actual profit under the normal rules instead. That is worth modelling in three situations: a loss making year, a year with heavy capital expenditure, and a year where denied foreign tax credits under condition four are large. It is an annual election, it is made in the return, and it cannot be applied retrospectively once the year has closed.

What this regime does not do for you

Two boundaries are worth stating plainly, because both get assumed away.

It is not a provincial exemption. Sales tax on services is a provincial subject administered by separate authorities under separate statutes. Nothing in section 154A speaks to that liability. The proviso discussed above excuses PSEB registered exporters from a condition in the federal income tax law about having filed sales tax returns. It does not remove any provincial obligation and it is not granted by any province. We cover the provincial picture in provincial sales tax on services across Pakistan.

It does not remove the registration and filing baseline. You still need an NTN under section 181, covered in the NTN registration guide, you still file a return under section 114 by the section 118 due date, and you still want to be on the Active Taxpayer List, for the reasons set out in the ATL guide.

A short compliance checklist

1. Confirm your PSEB registration is current and certified, and that the name on it matches the account receiving the proceeds.
2. Bring proceeds in through an authorised dealer so section 154A applies at realisation, and keep the bank advices showing the deduction.
3. File the return by 30 September, every year, without exception. This is what makes the deduction final.
4. File withholding statements if you are required to, for instance if you pay salaries or contractor fees yourself.
5. Check whether any foreign withholding is being suffered, and if it is material, model the opt out under section 154A(3) before you file rather than after.
6. Deal with the provincial sales tax question separately and on its own terms.

If your invoicing runs through an ERP and you want the compliance side handled inside it rather than beside it, that is our Odoo integration work.

Last verified: 22 August 2026. Primary sources read directly for this page: the Income Tax Ordinance 2001 as consolidated by the Federal Board of Revenue and stated to be amended up to 30 June 2026, specifically section 2(30AD) and section 2(30AE), section 154A (export of services) in full including subsections (1) to (6), section 65F together with the footnote recording the omission of its clause (c) by the Finance Act 2022, clause (133) of Part I of the Second Schedule together with the footnote recording its omission by the Finance Act 2021, and Division IVA of Part III of the First Schedule together with the footnote recording the substitution of the concessionary rate end point by the Finance Act 2026; and Rule 10(ca) of the Tenth Schedule. FBR's withholding tax rate cards updated to 30 June 2025 and to 30 June 2026 were compared and are described above. FBR also continues to host a page stating that exported IT services are exempt under clause (133) subject to an eighty percent remittance condition; that page predates the 2021 omission and should not be relied on. The PSEB registration fee and renewal period are deliberately omitted because the figures in circulation disagree; obtain them from PSEB directly. General information, not tax advice. Confirm your own position with your tax consultant.