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Govt to Withdraw Income Tax Exemption on IT and IT-Enabled Services

The government has decided to withdraw income tax exemption available to IT services and IT-enabled services through the Income Tax Amendment Bill, 2021.

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Under the draft bill, the IT services and IT-enabled services will be allowed to avail 100 percent tax credit at the time of filing of income tax returns. The withdrawal of income tax exemption would be done through the Income Tax Amendment Bill, 2021.


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As a replacement, the Federal Board of Revenue (FBR) will give 100 percent tax credit to the “IT Services” include software development, software maintenance, system integration, web design, web development, web hosting, and network design, and “IT-enabled services” include inbound or outbound call centers, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs and insurance claims processing.

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  • .Federal Board of Revenue (FBR) has clarified news circulating on social media about a proposal to withdraw exemption available to income from exports of computer software or IT services or IT enabled services. FBR has clarified that under the current legal dispensation, the exports of computer software, IT Services or IT enabled services is exempt from tax as provided under clause (133) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001. This exemption is subject to condition that 80% of the export earnings are remitted to Pakistan through normal banking channel. However, the persons claiming exemptions are subject to minimum tax on their turnover.

    There is proposal to widen the scope of tax concessions available to income from the export of software, IT services and IT-enabled services. For this purpose, the exemption is being shifted to tax credit regime. It has been proposed that such income may be provided hundred percent tax credit against tax liability including minimum tax liability on their turnover. The proposal enhances the scope of concession to the IT sector contrary to the news circulating in social media.

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