Does super tax under section 4C apply to an IT company whose income is mostly exports?

What does section 4C say?

Section 4C(1) imposes super tax “for tax year 2022 and onwards” at the rates in Division IIB of Part I of the First Schedule on the income of every person. There is no general carve-out for IT or software businesses in the section itself. Section 4C(2) defines “income” for this purpose as the sum of:

1. profit on debt, dividend, capital gains, brokerage and commission;
2. taxable income under section 9, ignoring brought forward depreciation and brought forward business losses;
3. “imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i)”; and
4. income computed under the Fourth, Fifth, Seventh and Eighth Schedules.

Is there an exclusion for mainly exporting companies?

Yes, from the Finance Act, 2026. Section 5 of that Act inserted clause (104B) into Part IV of the Second Schedule: “The provisions of section 4C shall not apply to a person if the export proceeds realized for the tax year represent more than eighty percent of his total turnover for the tax year.”

Three points about this clause:

• It does not name IT exports. It does not mention software, IT services, IT-enabled services or the PSEB. On its words it covers any person whose export proceeds pass the test.
• The test is a ratio of receipts, not income. It compares export proceeds realised with total turnover for the same tax year.
• Its key terms are not defined in the clause. “Export proceeds realized” and “total turnover” are not given a meaning in clause (104B). Section 113(3) has its own definition of turnover, but clause (104B) does not refer to it. How the ratio is measured in borderline cases is not settled by the text.

How does final-tax export income count if clause (104B) does not apply?

Section 169(2)(a) keeps final-tax income out of taxable income. That removes it from item 2 of section 4C(2). But item 3 picks it up again as imputable income. Section 2(28A) defines this as the income “which would have resulted in the same tax, had this amount not been subject to final tax”.

The definition gives no formula. For a company taxed at the flat Division II rate of 29%, the plain reading is the amount that would produce the section 154A tax at 29%. That is how the worked example below computes it. It is a reading of the definition, not a figure the law states.

What are the tax year 2027 rates?

The Division IIB Table as substituted by the Finance Act, 2026:

S. No.	Income under section 4C and person	Rate
1	Income of a banking company exceeding Rs. 150 million	10% of the income
2	Income computed under Part I of the Fifth Schedule exceeding Rs. 150 million, within the rule 4 limit	10% of the income
3	Income of a person selling any kind of fertilizer exceeding Rs. 150 million	10% of the income
4	Income of any other person exceeding Rs. 500 million	8% of the income

A software house falls in row 4. The table has no row for such a person at Rs. 500 million or below, and row 4 expresses the rate as “8% of the income”, not of the excess over Rs. 500 million.

Worked example (illustrative figures)

Company A, Islamabad: export proceeds Rs. 9,000,000,000 and local receipts Rs. 1,000,000,000 in tax year 2027. Exports are 90% of total receipts. If total turnover is read as both figures together, the 80% test in clause (104B) is met and section 4C does not apply.

Company B, Lahore: PSEB-registered, export proceeds Rs. 6,000,000,000 and local receipts Rs. 4,000,000,000. Exports are 60%, so clause (104B) does not help.

1. Section 154A tax on exports at 0.25%: Rs. 6,000,000,000 x 0.25% = Rs. 15,000,000.
2. Imputable income at the 29% company rate: Rs. 15,000,000 / 29% = Rs. 51,724,138 (rounded).
3. Taxable income from local business: Rs. 450,000,000.
4. Section 4C income: Rs. 450,000,000 + Rs. 51,724,138 = Rs. 501,724,138.
5. This exceeds Rs. 500 million, so row 4 applies: Rs. 501,724,138 x 8% = Rs. 40,137,931 (rounded).

Without the imputable income, Company B’s income would be Rs. 450,000,000 and no row of the table would apply.

What if …?

The company has a loss brought forward. Section 4C(2)(ii) ignores brought forward depreciation and business losses, so they do not reduce super tax income.

The company is in a minimum tax position. The Explanation to section 113(1) says “tax payable or paid” does not include tax under section 4C. Super tax is not used to escape section 113, and vice versa.

Payment. Section 4C(3) applies section 137 for payment, and section 4C(5A) applies section 147, so advance tax rules cover super tax.

Common mistakes

• Assuming final-tax exports are outside super tax. Only clause (104B) takes a company fully out. Below 80%, imputable income counts.
• Using the old graduated table. The 1% to 10% bands were replaced by the Finance Act, 2026 table above.
• Assuming clause (104B) needs PSEB registration. It does not say so.

What to check in the official text

Read section 4C, section 2(28A), the Division IIB Table and clause (104B) of Part IV of the Second Schedule in the Ordinance amended to 30 June 2026. Confirm how “export proceeds realized” and “total turnover” are being measured for your company, since the clause does not define them.