The federal government has unveiled a landmark budget for Financial Year 2026-27 that positions Pakistan for accelerated growth as an innovation-led and digitally driven economy.
The Finance Bill, presented by Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb, introduced a series of reforms aimed at providing regulatory certainty, reducing business costs, encouraging investment, and strengthening Pakistan’s digital ecosystem.
During his budget speech, Senator Aurangzeb highlighted the achievement of Pakistan’s IT expBudgetorts reaching $4.5 billion during the current fiscal year, reflecting a growth of more than 20 percent year-on-year.
A major announcement in the Finance Bill is the extension of the 0.25 percent concessionary tax rate for IT exports under Section 154A.
Previously set to expire on June 30, 2026, the concession has now been extended through Tax Year 2029, providing long-term tax certainty for exporters and technology companies.
In another significant relief measure, the government has reduced advance tax on foreign payments made through credit, debit, and prepaid cards from 5 percent to 0.5 percent.
This 90 percent reduction is expected to lower the cost of international software licenses, cloud services, and SaaS subscriptions for technology companies and freelancers, while also benefiting consumers participating in the global digital economy. The budget also provides relief to salaried professionals by increasing the income threshold for the 35 percent tax bracket from Rs4.1 million to Rs7 million annually, while simultaneously eliminating the associated surcharge. Additionally, the introduction of a 10 percent tax credit for FBR system integration is expected to encourage businesses to connect with national digital infrastructure and create new opportunities for software vendors and system integrators.
A zero percent customs duty on submarine cable landing station equipment continues to support investment in international connectivity infrastructure, facilitating the expansion of cloud services, data centres, and high-speed broadband networks.
The budget also maintains the existing zero percent customs duty on smartphones, ensuring continued affordability and access to smart devices for consumers and businesses.
A notable change introduced in the budget is the abolition of the Rs250 customs duty on feature phones, a measure expected to improve affordability and support broader access to mobile connectivity, particularly for first-time and low-income users.
The Finance Bill does not introduce changes to the existing duty structure for raw materials used by domestic SIM and smart card manufacturers, which already benefit from a 0 percent duty regime. Furthermore, the National Telecommunications Corporation (NTC) has been exempted from Section 153 withholding tax, improving cash flow and enabling more responsive investment in public telecommunications infrastructure. The Finance Bill introduced structural reforms aimed at addressing long-standing challenges faced by Pakistan’s startup ecosystem. Under Clause 43F, startups have been exempted from Section 153 withholding tax, allowing them to receive the full value of customer payments without cash being tied up in lengthy tax refund processes. The budget also restores tax pass-through treatment for venture capital (VC) funds under Clause 57(2).
The government has abolished super tax for companies earning below Rs 500 million and reduced the rate from 10 percent to 8 percent for businesses earning above that threshold.
These changes are expected to encourage reinvestment in hiring, infrastructure, innovation, and expansion. In a move aimed at encouraging diaspora investment, the government has also abolished the capital value tax (CVT) on foreign movable and immovable assets held by resident Pakistanis, signalling a commitment to attracting overseas capital and strengthening domestic investment flows.
Minister for Information Technology and Telecommunication Shaza Fatima Khawaja, while welcoming digital sector reforms, said the federal budget FY2026-27 represents a strategic commitment to digital transformation and reflects the government’s determination to build a resilient, competitive, and future-ready “Digital Nation Pakistan.” “We are especially indebted to the visionary leadership of Prime Minister Shehbaz Sharif, who has ensured our plans bear fruition, and to the strategic guidance of Field Marshal Syed Asim Munir,” she added.
She also acknowledged the support of the Special Investment Facilitation Council.
The reforms introduced in the federal budget FY2026-27, she said, collectively address many of the structural barriers that have constrained the growth of Pakistan’s digital economy.
Reduced operating costs, improved tax certainty, enhanced talent retention, stronger digital infrastructure, and increased access to venture capital are expected to support sustained growth in exports and employment across the technology sector.