FBR to Charge 4% Withholding Tax on IT Services in FY26

The Federal Board of Revenue (FBR) has officially confirmed that it will continue to charge a 4% withholding tax on IT and IT-enabled services for the fiscal year 2025-26, as per the newly released income tax circular under the Finance Act 2025. This move is being seen as a measure to support the country's rapidly growing technology and software export sector, which has long demanded consistency in tax policy.

While the FBR has significantly increased the withholding tax rates for various other sectors—raising it to 15% for unspecified services, 10% for sports persons, and 8% for specified services under Section 152, the IT sector has been exempted from these hikes. Similarly, under Section 153, the rate has been revised from 4% to 6%, but IT service providers will continue to enjoy the lower 4% slab.

This announcement comes as a relief for thousands of freelancers, software houses, and IT exporters operating across Pakistan. Maintaining the 4% tax rate is likely to boost investor confidence, promote digital exports, and reduce the compliance burden on companies contributing to the digital economy.

Industry experts believe that the decision reflects the government’s understanding of the IT sector’s potential in earning valuable foreign exchange and creating employment opportunities. With Pakistan aiming to expand its digital footprint globally, stable tax policies like this one could prove critical in sustaining momentum.

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