📌 Section 65F Tax Credit for IT/ITeS Companies — 2025 Update
By Dawars Associates – Your Trusted Tax & Corporate Advisors
🚀 Why This Matters
Pakistan’s IT sector enjoys powerful tax relief under Section 65F of the Income Tax Ordinance, 2001. This provision, designed to fuel digital exports and economic innovation, allows 100% tax credit to eligible IT companies — provided they are fully compliant and certified by PSEB.
If you’re operating in IT or ITeS, this article explains exactly how you can legally pay zero tax and benefit from these incentives in Tax Year 2025 and beyond.
🧾 What is Section 65F?
Section 65F provides a 100% tax credit to companies deriving income from:
- Export of computer software
- IT services
- IT-enabled Services (ITeS)
✅ Conditions to Qualify:
To claim this tax credit, the following conditions must be met:
- The taxpayer must be a company registered under the Companies Act.
- The company must be engaged in export of IT/ITeS/software.
- The company must be registered with the Pakistan Software Export Board (PSEB).
- It must have filed the following:
- Income Tax Return
- Withholding Tax Statements (even if NIL)
- Sales Tax Returns (if applicable)
- The company should not be in default of any tax obligations.
🟩 If all conditions are met, 100% of the tax liability is waived, through a tax credit mechanism — effectively reducing your tax payable to zero.
📘 Clause 62A of Section 2 – Definition of “Startup”
While the tax exemption under Clause 143 has been removed, the definition of a startup still exists in the law under Clause 62A of Section 2:
Clause 62A of Section 2:
“Startup” means a business of a resident individual, AOP, or a company that:
(a) is incorporated or registered on or after 1st July 2012;
(b) is engaged in innovation, development or improvement of products, processes or services, or has a scalable business model with high potential for employment generation or wealth creation;
(c) is registered with and certified by the Pakistan Software Export Board (PSEB);
(d) has an annual turnover not exceeding PKR 100 million in any tax year.
This definition now serves primarily as a qualification criteria for PSEB and other incentive programs, but not for direct tax exemption. Instead, all tax relief is channeled through Section 65F.
🔁 Exemption Replaced by Tax Credit
❌ Previously:
- Clause 143 gave 3 years of complete tax exemption to PSEB-certified startups.
- This clause was removed through the Finance Act, 2021.
✅ Now:
- IT/ITeS companies, whether startups or established, can avail 100% tax credit under Section 65F, as long as they meet all compliance requirements.
- There is no longer a separate 3-year exemption.
🧾 PSEB Registration – Still Essential
Whether you’re a startup or a growing IT firm, PSEB certification remains the foundation for availing tax benefits.
📌 What You Need for PSEB Certification:
- SECP Certificate of Incorporation
- NTN & STRN
- Business profile (services, team, exports)
- Contracts/invoices for IT/ITeS work
- Domain, HR & operational info
PSEB certification validates your business model and is a precondition for Section 65F tax credit.
⚠️ Common Pitfalls to Avoid
- Not filing withholding tax statements (even if NIL)
- Lapsed or missing PSEB certification
- Not segregating IT vs non-IT income
- Export income not documented properly
- Turnover crosses PKR 100M, but startup not transitioned to Section 65F compliance
📥 Dawars Associates Can Help You
At Dawars Associates, we help you:
- Register with SECP & PSEB
- Maintain compliance for Section 65F
- Ensure smooth filing of all returns
- Maximize allowable tax credits
- Manage audit queries or tax notices
📞 Contact us now to ensure you qualify for 100% tax credit legally and confidently!
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