The federal government has proposed extending the preferential tax regime for Pakistan’s IT and IT-enabled services sector for another three years as part of the Budget 2026-27, providing significant policy continuity to one of the country’s most dynamic export industries at a moment when the sector has been anxiously watching for confirmation that its favourable tax treatment would survive the budget cycle. The existing 0.25 percent tax rate on IT exports under the Final Tax Regime, which was due to expire on June 30, 2026, will now be extended until June 30, 2029, according to the budget proposals presented on June 12, 2026.
The extension follows sustained advocacy from IT companies, freelancers, software houses, and digital exporters who had repeatedly flagged uncertainty around the regime’s future as a barrier to long-term investment planning, client commitment, and workforce expansion. PASHA had formally urged the Federal Board of Revenue and the Ministry of Finance to extend the regime by ten years rather than three, arguing that short-term renewals are fundamentally incompatible with the long investment cycles and multi-year client contracts that define the information technology export industry. While the three-year extension falls short of the decade-long certainty the industry had requested, it provides a meaningful reprieve from the immediate threat of a tax burden increase that would have taken effect on July 1, 2026 without intervention.
Prime Minister Shehbaz Sharif is reported to have personally taken notice of industry concerns and directed authorities to ensure continuity of incentives aimed at supporting export growth, with officials framing the extension as a clear government commitment to supporting the technology sector and strengthening Pakistan’s position as a competitive destination for digital services exports. The continuation of the reduced tax rate is expected to encourage further investment in the sector, attract international clients, support job creation among young digital professionals, and help Pakistani firms compete more effectively against regional technology hubs in India, Bangladesh, and the Philippines. Federal Minister Shaza Fatima Khawaja had confirmed just three days earlier that the Ministry of Information Technology and Telecommunication had secured its full Rs 22 billion development budget, making the Final Tax Regime extension the second significant budget win for the technology sector within a single week.
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