ISLAMABAD

Pakistan’s technology sector secured a major win in the federal budget for FY2026-27 after the government extended key tax incentives for IT exporters and freelancers until June 2029, providing much-needed policy certainty for one of the country’s fastest-growing export industries.

Under the budget measures, IT exporters and freelancers registered with the Pakistan Software Export Board (PSEB) will continue to benefit from the concessional 0.25 percent Final Tax Regime (FTR), preventing the incentive from expiring at the end of June 2026. The government also reduced withholding tax on international debit and credit card transactions from 5 percent to 0.5 percent, a move aimed at facilitating cross-border digital commerce.

Federal Minister for IT and Telecommunication Shaza Fatima Khawaja described the measures as a significant boost for Pakistan’s digital economy, saying they support the government’s ambition to expand ICT exports and strengthen the country’s position as a regional technology hub.

However, industry leaders argue that the relief package falls short of addressing deeper structural challenges facing the sector. Stakeholders have pointed to unresolved issues such as the taxation gap between freelancers and salaried IT professionals, limited investment in artificial intelligence, and the need for broader reforms to accelerate export growth and attract foreign investment.

Analysts say the extension offers stability and may help retain export earnings within formal banking channels, but the long-term success of Pakistan’s technology industry will depend on sustained policy consistency, investment in emerging technologies, and measures that encourage companies to scale globally.

With Pakistan’s IT exports continuing to grow and the digital economy becoming an increasingly important source of foreign exchange, the next few years are expected to test whether the latest incentives can translate into accelerated industry expansion and global competitiveness.