If you are a freelancer in Pakistan who works on websites such as Upwork or Fiverr and are not registered with the Pakistan Software Export Board (PSEB), you may be concerned about your tax liability. The good news is that according to Section 154A of the Income Tax Ordinance, 2001, IT and software service providers are liable to pay a flat 1% tax—whether registered with PSEB or not. In this article, I will explain what this implies for you and how it impacts your freelancing earnings.
Tax Implications for Freelancers Not Registered with PSEB
You are a freelancer offering IT and software-related services and are not registered with the Pakistan Software Export Board (PSEB), you are still within the ambit of Section 154A of the Income Tax Ordinance, 2001.
Tax Rate Details (Regardless of Income Level):
IT & Software Services – 1% Final Tax (irrespective of whether registered with PSEB or not)
Understanding Section 154A of the Income Tax Ordinance, 2001
Section 154A deals with tax deductions on foreign remittances made to freelancers and IT service providers. Regardless of whether you are enrolled with PSEB or not, your freelancing income is liable to a flat rate of 1% tax when remittances are received in your Pakistani bank account.
Should You Register with PSEB?
While PSEB registration is not mandatory for freelancers, it offers several benefits:
- Tax Incentives: PSEB-registered IT exporters may qualify for certain tax exemptions and incentives.
- Government Support: Registered freelancers can avail themselves of various government programs for IT professionals.
- Credibility: Registration enhances credibility when dealing with international clients and financial institutions.
Key Takeaways
- Freelancers in Pakistan must pay tax on their earnings under Section 154A of the Income Tax Ordinance, 2001.
- If you are providing IT and software services, the tax rate is only 1%, even if you are not registered with PSEB.
- PSEB registration is beneficial, but not mandatory to qualify for this tax rate.
Conclusion
If you are a freelancer offering IT and software services from Pakistan, your tax obligation is still 1% under Section 154A, whether you are PSEB-registered or not. But being registered with PSEB may have added benefits, so it is something to consider.
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Also Read:
- Income Tax Return Course in Pakistan
- How to File Income Tax Return in 2025
- Professional Charges in Tax Returns in Pakistan
