Budget 2026-27 Brings Major Changes to IT, Digital Payments and EV Policy

The Budget 2026-27 has introduced a wide range of fiscal measures spanning Pakistan’s digital economy, international payments, and the EV sector, reflecting a mix of tax relief, rationalisation, and new revenue-raising initiatives.

In a major relief for the information technology sector, the government has extended the income tax exemption for IT exporters until June 2029. The move is aimed at sustaining growth in IT and IT-enabled services, supporting export earnings, and providing long-term fiscal certainty to technology companies, freelancers, and software houses.

Budget 2026-27 Brings Major Changes to IT, Digital Payments and EV Policy

In parallel, the government has also reduced the withholding tax on international debit and credit card transactions from 5 percent to 0.5 percent. The sharp reduction will ease the cost of cross-border digital payments, benefiting individuals and businesses engaged in international subscriptions, online services, freelancing platforms, and e-commerce-related transactions.

At the same time, the budget has introduced a new withholding tax regime on income generated from social media platforms such as YouTube, Instagram, and TikTok. Under the proposed framework, banks will be required to deduct tax on earnings received by content creators and influencers, bringing digital monetisation within the formal tax net and strengthening documentation of the online creator economy.

Separately, in the manufacturing and industrial sector, the government has extended the exemption on the import of Completely Knocked Down (CKD) kits for electric vehicles (EVs) for one more year, until June 30, 2027. The extension is intended to support local assembly operations and promote continued investment in the emerging EV industry.

Collectively, the measures highlight the government’s attempt to balance incentives for export-oriented digital industries and emerging technologies with expanded taxation of fast-growing online income streams, as well as continued support for green mobility initiatives.

Industry observers note that the budget reflects a broader shift toward formalising digital economic activity while maintaining targeted incentives for sectors considered critical to foreign exchange earnings and industrial development.

See Also: Government Proposes 5% Withholding Tax on Social Media Earnings in Budget 2026