Federal budget 2023-24: IT sector receives SME status, freelancers get tax relief

Islamabad: The federal government on Friday took a significant step towards promoting the Information Technology (IT) sector by granting it the status of Small and Medium Enterprises (SMEs).

Finance Minister Ishaq Dar, during the unveiling of the federal budget for the fiscal year 2023-24, announced various measures to support the growth of the IT industry.

To encourage the IT sector, the government has extended the income tax relief on IT imports until June 2026. Additionally, a venture capital fund of Rs5 billion will be established specifically for the IT sector, aimed at fostering innovation and entrepreneurship.

Recognizing the importance of skilled professionals in the IT field, the government has planned to provide professional training to 50,000 IT graduates, enhancing their capabilities and employability.

In a move to facilitate freelancers, who play a vital role in the digital economy, the government has exempted them from sales tax registration and returns for annual exports up to $24,000. Moreover, a simplified one-page income tax returns form will be introduced, easing the tax filing process for freelancers.

Furthermore, the government extended the concessionary tax rate of 20% for banking companies' income from additional advances to low-cost housing, agriculture, SMEs (including IT & ITeS) for an additional two years. This measure aims to boost these key sectors and promote inclusive economic growth.

In an effort to promote exports, the government plans to encourage online platforms for the export of various commodities, including agriculture products, gems, and metals. Indirect exporters will benefit from a concessionary final tax rate of 1%, further incentivizing export-oriented businesses.