Is the section 65F 100% tax credit and the 80% remittance condition still available to IT exporters?

Many software houses still plan around a “100% tax credit on IT exports, as long as 80% of proceeds come home”. That rule existed, in two different forms, but neither is in the Income Tax Ordinance, 2001 as amended to 30 June 2026.

What does section 65F say now?

Section 65F(1) gives a tax credit equal to one hundred per cent of tax payable “including minimum, alternate corporate tax and final taxes”, but only to two categories:

• Clause (a): persons engaged in coal mining projects in Sindh, for income from supplying coal to power generation projects.
• Clause (b): “a startup as defined in clause (62A) of section 2 for the tax year in which the startup is certified by the Pakistan Software Export Board” and the next two tax years.

There is no clause for IT export income. An established software house that exports services is outside section 65F unless it is a certified startup within clause (b).

Where did the IT export credit and the 80% rule go?

The history has two steps, both recorded in the footnotes of the consolidated Ordinance.

Step 1: the clause (133) exemption. Part I of the Second Schedule used to exempt, in clause (133), “Income from exports of computer software or IT services or IT enabled services” up to 30 June 2025, with a proviso that “eighty per cent of the export proceeds is brought into Pakistan in foreign exchange remitted from outside Pakistan through normal banking channels.” The footnote says clause (133) was omitted by the Finance Act, 2021, and earlier through the Tax Laws (Second Amendment) Ordinance, 2021.

Step 2: the section 65F(1)(c) credit. Section 65F was inserted by the Finance Act, 2021. Its clause (c) gave the credit to “Income from exports of computer software or IT services or IT enabled services as defined in clause (30AD) and (30AE) of section 2 upto the period ending on the 30th day of June, 2025”, with the same eighty per cent proviso. Section 5 of the Finance Act, 2022 then provided that “in section 65F, in sub-section (1), clause (c) shall be omitted”.

So the exemption became a credit in 2021, and the credit was removed in 2022. Both versions also carried an end date of 30 June 2025, so neither could reach tax year 2027 even on its own terms.

What taxes a software house’s export income instead?

Section 154A(1) requires the authorised dealer in foreign exchange, when it realises export proceeds, to deduct tax at the rates in Division IVA of Part III of the First Schedule. Clause (a) covers “exports of computer software or IT services or IT enabled services” where the exporter is registered with and certified by the Pakistan Software Export Board (PSEB). Clause (b) covers other services rendered outside Pakistan or exported from Pakistan.

Type of receipt (Division IVA)	Rate
Export proceeds of computer software, IT services or IT-enabled services by persons registered with the PSEB	0.25% of proceeds, for tax years 2024 up to tax year 2029
Any other case	1% of proceeds

Under section 154A(2) the tax is final once the return is filed and the other listed conditions are met. Section 154A(3) allows a yearly option not to be subject to final taxation.

Worked example (illustrative figures)

A 40-person software company in Lahore, registered with the PSEB, realises Rs. 120,000,000 in export proceeds in tax year 2027. Its finance team is working from a 2020 checklist that says the company pays nothing if 80% of proceeds are remitted.

1. Clause (133) of the Second Schedule no longer exists. Section 65F(1) has no IT export clause. The checklist is out of date.
2. The company is not a certified startup, so section 65F(1)(b) does not apply.
3. Section 154A(1)(a) applies because the company is PSEB-registered.
4. Division IVA rate: 0.25%.
5. Tax deducted by the bank: Rs. 120,000,000 x 0.25% = Rs. 300,000.

If the company were not PSEB-registered, the “any other case” row would apply: Rs. 120,000,000 x 1% = Rs. 1,200,000.

What if the company is a certified startup?

Section 65F(1)(b) still works, and its credit covers tax payable “including minimum, alternate corporate tax and final taxes”. That wording reaches the section 154A tax as well. The credit lasts for the tax year of PSEB certification and the next two tax years. Section 65F(2) makes it conditional on a filed return, filed withholding statements where the company is a withholding agent, and filed sales tax returns where the company is required to file them. Whether a company is a “startup” depends on the definition in clause (62A) of section 2, covered on a separate page.

Common mistakes

• Treating the 80% remittance rule as current law. It was a proviso to clause (133) and to section 65F(1)(c). Both are omitted.
• Reading section 154A as if it had the same condition. Section 154A and Division IVA contain no eighty per cent test.
• Assuming any software house qualifies for the startup credit. Clause (b) is limited to startups certified by the PSEB, and only for three tax years.

What to check in the official text

Read section 65F and its footnotes, section 154A, and Division IVA of Part III of the First Schedule in the Ordinance amended to 30 June 2026. The footnote to clause (133) of Part I of the Second Schedule reproduces the omitted exemption. Section 5 of the Finance Act, 2022 contains the omission of section 65F(1)(c). The PSEB’s registration procedure is outside this corpus.