PSEB and IT export
Tax for Freelancers in Pakistan
Freelance income is business income, taxed on the non-salaried slabs, not the gentler salaried ones. Export receipts are withheld by your bank under section 154A: 0.25% if you are registered with PSEB, 1% if not. A domestic client withholds nothing unless it is a prescribed person. The 80% banking-channel rule you have read about was repealed in 2022.
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Where these figures come from
- Statutory basis
- Income Tax Ordinance, 2001, as amended by the Finance Act 2026, for tax year 2027 (1 July 2026 to 30 June 2027).
- Last checked against the statute
- by BarrioVibe, which files income tax returns through FBR IRIS.
These figures are an estimate computed from the rates above, not tax advice for your situation. Your return depends on facts a form cannot see, so treat the number as a starting point and speak to us before you file on it.
The non-salaried table
Unchanged by the Finance Act 2026, which reduced the salaried rates and left these alone. The gap widened this year rather than narrowing.
| Taxable income | Rate on the excess | Tax at the floor |
|---|---|---|
| Up to Rs 600,000 | Nil | - |
| Rs 600,001 to Rs 1,200,000 | 15% | - |
| Rs 1,200,001 to Rs 1,600,000 | 20% | Rs 90,000 |
| Rs 1,600,001 to Rs 3,200,000 | 30% | Rs 170,000 |
| Rs 3,200,001 to Rs 5,600,000 | 40% | Rs 650,000 |
| Above Rs 5,600,000 | 45% | Rs 1,610,000 |
Exporting: two rates, and PSEB is what separates them
Section 154A requires every authorised dealer in foreign exchange, which in practice means your bank, to deduct tax when it realises your foreign proceeds. There are two relevant limbs and competitors collapse them into one.
Clause (a) covers exports of computer software, IT services or IT enabled services where the exporter is registered with and duly certified by PSEB, and the rate is 0.25%. Clause (b) covers services or technical services rendered outside Pakistan or exported from Pakistan generally, and the rate is 1%.
So an unregistered freelancer exporting services is not outside section 154A. They are inside it at four times the rate. The Finance Act 2026 extended the 0.25% rate to tax year 2029.
What the registration is worth
Enter your annual export receipts to see the gap between 0.25% and 1%, against the Rs 1,000 a year PSEB registration costs.
Freelancer & IT ExportDomestic clients usually withhold nothing
Section 153 requires withholding on services, but only where the payer is a prescribed person. That list includes companies, associations of persons, and individuals or associations with turnover of Rs 100 million or more, among others. An ordinary small business paying you for a website is not on it.
There is also a floor: services are only caught where payments to you aggregate above Rs 30,000 in a financial year. Below the prescribed-person threshold and below that floor, nothing is withheld, and the income is simply declared in your return with advance tax under section 147 if it applies.
What counts as IT and IT enabled services
The definitions are in section 2. IT services include but are not limited to software development, software maintenance, system integration, web design, web development, web hosting and network design. IT enabled services include but are not limited to call centres, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine, data entry, cloud computing and data storage.
Both lists are inclusive rather than exhaustive, and what is missing is conspicuous: video editing, translation, copywriting, general virtual assistance and social media management are not named. Whether they qualify is a real question for a large number of Pakistani freelancers, and we have found no FBR ruling on it. If your work sits outside the named list, get advice rather than assuming the answer.
Inward remittance is not tax-free
Section 111(4) is widely misdescribed. It provides that the unexplained-income rules do not apply to foreign exchange remitted through normal banking channels not exceeding five million rupees in a tax year, encashed into rupees by a scheduled bank, with a certificate produced to that effect. The Finance Act 2022 added that money service bureaus, exchange companies and money transfer operators count as normal banking channels.
Three things follow that guides rarely state. It is capped at Rs 5 million a year. It requires encashment and a certificate, not merely receipt. And it is only a shield against being asked to explain the source: it is not an exemption from tax on the income itself, which remains taxable under section 154A or on the slabs.
Housekeeping that catches people out
- A personal NTN is enough, and PSEB actively requires a personal NTN with no business name for a freelancer registration.
- But section 114A requires you to declare the bank account you use for business transactions, through the registration form.
- Records must be kept for six years after the end of the tax year under section 174, and indefinitely for foreign-source matters.
- Final tax does not mean no filing. Section 114(1)(ae) requires a return from anyone whose income is subject to final taxation, and section 154A(2)(a) makes filing a condition of the final-tax treatment itself.
- Minimum tax under section 113 applies to an individual only at Rs 100 million turnover, so it is almost certainly not your problem.
Questions
The questionspeople ask
How much tax do freelancers pay in Pakistan?
On export receipts, your bank withholds 0.25% if you are registered with PSEB and 1% if not, under section 154A. Domestic income is taxed on the non-salaried slabs, which start at 15% on income above Rs 600,000 and reach 45% above Rs 5.6 million.
Do freelancers pay the same tax rates as salaried people in Pakistan?
No, and the difference is large. The salaried table applies only where salary exceeds seventy-five percent of taxable income. At the first taxable band a salaried person pays 1% and a freelancer pays 15%.
Do I need to bring 80% of my freelance earnings through a bank?
No. That condition was a proviso to section 65F(1)(c) and the Finance Act 2022 omitted the clause entirely. It was never part of section 154A, which operates when your bank realises the foreign exchange in any event.
Do Pakistani clients deduct tax from freelancers?
Only if they are a prescribed person under section 153, which covers companies, associations of persons, and individuals or associations with turnover of Rs 100 million or more, among others. There is also a Rs 30,000 aggregate floor per financial year. An ordinary small client withholds nothing.
Is foreign remittance taxable in Pakistan?
The remittance itself is not treated as unexplained income up to Rs 5 million a year under section 111(4), provided it comes through normal banking channels, is encashed into rupees and a bank certificate is produced. That is a shield against having to explain the source. The income remains taxable.
Do freelancers in KPK have to register for sales tax?
Possibly, and exporting does not obviously help. Unlike Islamabad, which zero-rates exported services, the KP Act has no export relief and section 3(4) taxes a service originating in the Province that terminates outside Pakistan. Entry 15 of the Second Schedule taxes digital and IT-based services at 2%. The position for an individual freelancer under entry 19 is ambiguous on the face of the Act, so ask KPRA.
Do I need a business NTN as a freelancer?
No. A personal NTN is sufficient, and PSEB specifically requires a personal NTN with no business name attached for freelancer registration. You do have to declare the bank account you use for business under section 114A.
Is video editing or translation an IT enabled service?
Not named in section 2(30AE), which lists call centres, medical transcription, remote monitoring, graphics design, accounting, HR services, telemedicine, data entry, cloud computing and data storage among others. The list is inclusive rather than exhaustive, so the question is open and we have found no FBR ruling on it.
If my tax is final, do I still have to file a return?
Yes, twice over. Section 114(1)(ae) requires a return from anyone whose income is subject to final taxation, and section 154A(2)(a) makes filing a return a condition of the final-tax treatment. Fail to file and you lose the 0.25% rate.
Also here
Relatedguides
PSEB and the 0.25% rate
What section 154A actually requires, the 80% banking condition that was repealed in 2022, and what PSEB really charges.
How to get an NTN
Registration is free, a salaried person attaches no documents, and the step most people miss is the one that actually completes it.
Section 159 certificates
The fifteen-day rule that only applies to companies, and why a certificate usually cannot touch a minimum or final tax.
Rather have someone handle it?
We file returns through IRIS every day. If the answer above raises a question about your own case, that is the conversation to have before the deadline rather than after it.