Federal Budget 2026-27 Focuses on Digital Economy and IT Sector Growth
ISLAMABAD — The federal government has unveiled a series of measures in the Budget 2026-27 aimed at supporting Pakistan’s digital economy, information technology sector, telecommunications infrastructure, and startup ecosystem.
Presented by Finance Minister Senator Muhammad Aurangzeb, the budget introduces tax incentives, infrastructure support measures, and policy reforms designed to encourage investment and promote digital transformation.
Support for IT Exports
One of the key measures announced is the extension of the concessional tax rate for IT exports. The reduced tax rate of 0.25 percent has been extended until Tax Year 2029, providing greater policy certainty for technology companies and exporters.
The government also reduced advance tax on international payments made through credit, debit, and prepaid cards from 5 percent to 0.5 percent. The change is expected to lower costs associated with software subscriptions, cloud services, and other digital tools used by businesses and freelancers.
Relief for Professionals and Businesses
The budget includes adjustments to income tax thresholds, increasing the annual income level for the highest tax bracket from Rs. 4.1 million to Rs. 7 million. The associated surcharge has also been removed.
A new tax credit for businesses integrating with the Federal Board of Revenue’s digital systems has also been introduced to encourage greater adoption of digital processes.
Telecom and Digital Infrastructure
To support connectivity and technology infrastructure, the government has maintained a zero percent customs duty on submarine cable landing station equipment and smartphones.
The customs duty previously applied to feature phones has also been removed, a move expected to improve affordability and expand access to mobile connectivity.
In addition, the National Telecommunications Corporation (NTC) has been granted relief from certain withholding tax requirements to facilitate investment in public telecommunications infrastructure.
Measures for Startups and Venture Capital
The budget includes several initiatives aimed at supporting startups and investment activity.
Eligible startups have been granted relief from certain withholding tax provisions, while tax treatment for venture capital funds has been restored to support investment in emerging businesses.
The government has also reduced the Super Tax burden for many companies and removed it entirely for businesses below specified income thresholds, with the aim of encouraging business expansion and reinvestment.
Focus on Digital Transformation
Officials say the measures are intended to strengthen Pakistan’s digital ecosystem, improve technology infrastructure, encourage innovation, and support growth in IT exports and employment.
The reforms form part of broader efforts to promote digital transformation and enhance the competitiveness of Pakistan’s technology sector in regional and global markets.
