Do PSEB-certified tech startups get income tax relief, and what counts as a startup?

A startup certified by the Pakistan Software Export Board (PSEB) can have its whole income tax bill covered by a credit for three tax years. Section 65F of the Income Tax Ordinance grants the credit, and clause (62A) of section 2 decides who counts as a startup. Both have conditions that are easy to miss.

What does section 65F give a startup?

Section 65F(1) allows certain persons “a tax credit equal to one hundred per cent of the tax payable under any provisions of this Ordinance including minimum, alternate corporate tax and final taxes”. Clause (b) names:

a startup as defined in clause (62A) of section 2 for the tax year in which the startup is certified by the Pakistan Software Export Board and the next following two tax years.

So the credit runs for three tax years, counted from the year of PSEB certification, not the year the business began.

What counts as a startup?

Clause (62A)(i) of section 2 defines a startup as a business of a resident individual, AOP or company that meets every one of these tests:

Test	Wording of clause (62A)(i)
Start date	commenced on or after the first day of July, 2012
Activity	is engaged in or intends to offer technology driven products or services to any sector of the economy
Certification	registered with and duly certified by the Pakistan Software Export Board (PSEB)
Size	turnover of less than one hundred million in each of the last five tax years

Clause (62A)(ii) adds any other business or class of persons the Board, with the approval of the Federal Minister-in-charge, specifies by notification in the official Gazette. No such notification is held in this corpus.

Two points in the wording deserve attention. The activity test says “intends to offer”, so a business still building its product can qualify. The turnover test applies to “each of the last five tax years”, so a single year at or above one hundred million fails it. The clause does not say “rupees” after “one hundred million”.

What conditions must be met to use the credit?

Section 65F(2) makes the credit available only where these conditions, where applicable, are fulfilled:

1. the return has been filed;
2. withholding tax statements for the relevant tax year have been filed, where the person is a withholding agent; and
3. sales tax returns for the matching tax periods have been filed, if the person is required to file them under any Federal or Provincial sales tax law.

A startup with even one employee on salary, or one contractor it pays, is likely to be a withholding agent, so condition 2 is the one most often missed.

Worked example (illustrative figures)

Sehat Stack (Pvt) Ltd, a Peshawar health-tech company, was incorporated in 2023 and certified by PSEB during tax year 2026.

Tax year	Covered by section 65F(1)(b)?	Reason
2026	Yes	Year of PSEB certification
2027	Yes	First following year
2028	Yes	Second following year
2029	No	Outside the three-year window

Suppose its tax payable for tax year 2027, computed under the Ordinance, comes to Rs. 650,000, and it files its return, its withholding statements and any sales tax returns it is required to file.

1. Tax payable: Rs. 650,000.
2. Credit under section 65F: 100% x Rs. 650,000 = Rs. 650,000.
3. Tax left to pay: Rs. 650,000 - Rs. 650,000 = nil.

If Sehat Stack had skipped its withholding statements for tax year 2027, section 65F(2) would deny the credit for that year and the Rs. 650,000 would be payable.

Do local clients still deduct tax from a startup?

Clause (43F) of Part IV of the Second Schedule says the provisions of section 153 “shall not apply in the case of a start-up, being recipient of payment, as defined in clause (62A) of section 2”. Section 153 is the section that otherwise requires a paying company to deduct tax from a payment for services at the Division III rate. That clause is explained on the related page on minimum tax and withholding for startups.

What if the startup grows past one hundred million?

Clause (62A)(i) requires turnover below one hundred million in each of the last five tax years. Section 65F(1)(b) grants the credit to “a startup as defined in clause (62A)”. The Ordinance does not say expressly whether a business that passes the turnover limit during its three-year window keeps the credit for the remaining years. This page does not resolve that question.

Common mistakes

• Counting from incorporation. The three years start with the tax year of PSEB certification.
• Treating certification as enough. Section 65F(2) adds filing conditions.
• Assuming any IT business qualifies. A business that commenced before 1 July 2012 falls outside clause (62A)(i).

What to check in the official text

Read section 65F and clause (62A) of section 2 in the Ordinance amended to 30 June 2026, and clause (43F) of Part IV of the Second Schedule. PSEB’s own certification criteria and any Board notification under clause (62A)(ii) are not in this corpus.