Pakistan's Budget 2023-24: Boosting IT Sector with Tax Relief for SMEs and Freelancers

Pakistan Grants SME Status to IT Sector and Announces Tax Relief for Freelancers in Budget 2023-24

In a significant development, the federal government of Pakistan has taken steps to develop the Information Technology (IT) sector by granting it the status of Small and Medium Enterprises (SMEs). This statement was made by Finance Minister Ishaq Dar during the unveiling of the federal budget for the fiscal year 2023-24, which has a total outlay of Rs14,460 billion.

Ishaq Dar Highlighted the government's commitment to supporting the IT sector and announced that income tax relief on IT imports has been extended until June 2026. Moreover, a notable movement to foster innovation and growth in the sector involves the establishment of an Rs5 billion venture capital fund specifically dedicated to supporting IT-related initiatives.

Recognizing the importance of human capital development, the government has also decided to provide professional training to 50,000 IT graduates. This step aims to enhance the skill set of IT professionals in the country and further facilitate the growth of the sector.

Freelancers, who play a significant role in the IT industry, have received favorable treatment in the budget. They have been exempted from sales tax registration and returns for annual exports up to $24,000. To simplify the tax filing process, a user-friendly, one-page income tax return form has been introduced exclusively for freelancers.

To stimulate the economy and facilitate specific sectors, the government has extended the concessionary tax rate of 20% for banking companies' income from additional advances to low-cost housing, agriculture, and SMEs, including the IT and IT-enabled services (ITeS) sectors. This extension, spanning two years, aims to encourage investment and economic activity in these key areas.

Furthermore, the government has taken measures to promote exports, particularly in agricultural production, gems, metals, and other commodities. An online platform has been introduced to facilitate indirect exporters, who will profit from a concessionary final tax rate of 1%.

These initiatives reflect the government's commitment to promoting the IT sector and creating a favorable business environment for freelancers and SMEs. By offering tax relief, venture capital funds, professional training, and simplified tax procedures, the government aims to drive innovation, development, and economic prosperity in Pakistan's burgeoning IT industry.