Export services tax exemption Pakistan SRO 1125 IT export guide

SRO 1125(I)/2023 is arguably the most important tax benefit available to Pakistani IT professionals, freelancers, and digital businesses. Under this notification, income earned from export of IT and IT-enabled services is completely exempt from income tax — potentially saving lakhs of rupees annually. This complete guide explains every aspect of this exemption so you can claim it correctly in 2026.

What is SRO 1125(I)/2023?

SRO 1125(I)/2023 is a Statutory Regulatory Order issued by the Federal Board of Revenue (FBR) that provides income tax exemption on revenues derived from the export of IT and IT-enabled services. It replaced and expanded earlier IT export exemption provisions and is currently the governing regulation for this benefit.

Key SRO 1125 Benefit

100% income tax exemption on income from export of IT and IT-enabled services to foreign clients/companies — applicable to both individual freelancers/consultants and companies registered in Pakistan. Previously this exemption was only available to companies; it now covers individuals too.

Which Services Qualify for IT Export Exemption?

Software Development
Web dev, app development, custom software, APIs, databases, SaaS products.
UI/UX & Graphic Design
Interface design, graphic design, branding, illustration for foreign clients.
Digital Marketing & SEO
SEO, PPC management, social media marketing, email marketing, content marketing.
Content Writing
Blog writing, copywriting, technical writing, translation for foreign clients.
Data Services
Data entry, data processing, data analysis, research services, BPO.
Virtual Assistance & BPO
Virtual assistant, customer support, call center work for foreign companies.
AI & Automation Services
AI development, ML services, automation, chatbot development for foreign clients.
Video & Multimedia
Video editing, animation, YouTube management, podcast editing for foreign clients.

What Does NOT Qualify?

Services that do NOT qualify for IT export exemption: (1) Services to Pakistani clients (regardless of service type). (2) Physical goods export (separate export rules). (3) Real estate consulting for foreign clients. (4) Financial advisory/brokerage for foreign clients (different rules). (5) Physical manufacturing/production. (6) Any service where payment NOT received through designated banking channel.

The Banking Channel Requirement — Critical

The most important condition — often misunderstood — is that payment must arrive through a designated Pakistani banking channel. This is what FBR uses to verify and document the foreign remittance:

SWIFT wire to Pakistani bank ✓
Payoneer → Pakistani bank ✓
Wise → Pakistani bank ✓
Freelancer.com → Pakistani bank ✓
Upwork → Pakistani bank ✓
Crypto payments ✗
Payoneer balance (not withdrawn) ✗
Informal/hawala ✗

How to Claim IT Export Exemption in FBR Return

  • Step 1: Collect all evidence — invoices issued to foreign clients, bank statements showing foreign remittances, Payoneer/Wise transaction history
  • Step 2: Log into FBR IRIS portal (iris.fbr.gov.pk)
  • Step 3: In your income tax return, under business income section, enter total IT export income
  • Step 4: Mark this income as "IT export exempt" in the exemption section
  • Step 5: Attach supporting documents (invoices + bank statements) when filing
  • Step 6: Claim refund of any WHT (1%) deducted by bank on foreign remittances

Documentation is key: FBR can ask for proof of your IT export exemption claim during audit. Maintain a folder with: every foreign client invoice (PDF), bank certificate showing foreign remittance, Payoneer/Wise transaction history. Keep 5 years of records.

Frequently Asked Questions

Is SRO 1125 still valid in 2026?
Haan — SRO 1125(I)/2023 abhi bhi in effect hai. FBR ne isko cancel nahi kiya. Har saal ke Finance Act mein check karna chahiye ke koi changes to nahi hue. 2026 ke liye yeh SRO valid hai aur applicable hai.
Do I need PSEB registration to claim IT export exemption?
PSEB (Pakistan Software Export Board) registration mandatory nahi hai SRO 1125 claim ke liye individuals ke liye. Companies ke liye bhi directly SRO 1125 apply hota hai bina PSEB ke. PSEB registration optional hai lekin kuch additional benefits de sakti hai.
If I have both Pakistani and foreign clients, which income is exempt?
Sirf foreign client income IT export exempt hoti hai — Pakistani client income normal tax slabs par taxable hai. Dono ko alag records mein maintain karo. FBR return mein alag declare karo.
Bank deducts 1% WHT on my foreign remittances — can I get it back?
Haan — yeh 1% WHT adjustable tax credit hai. Annual return mein total tax liability se minus hoga. Agar aapki saari income IT export exempt hai, to yeh 1% WHT fully refundable hai. Return submit karo aur refund claim karo IRIS mein.
Can a Pvt Ltd company claim IT export exemption?
Haan — SECP registered Private Limited companies bhi SRO 1125 ke thet IT export exemption claim kar sakti hain. Company ke return mein IT export income ko exempt category mein declare karo. Same banking channel aur documentation requirements apply hoti hain.

IT Export Exemption — Kamboh Associates

SRO 1125 ke thet apna income tax zero karo. Kamboh Associates IT export exemption claim aur FBR compliance handle karta hai.

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