government introduced the tax scheme for builders and developers

Tax Scheme For Builders & Developers

Finally, the government introduced the long-awaited tax scheme for builders & developers.

And we are here to unfold the secrets.

So, get ready guys.

The Basics

Before we get deep into the subject, here is the summary of the scheme.

  • Deposit the project money in the bank account.
  • In the case of land, make sure it’s registered before the introduction of the scheme.
  • Get the blueprint approved by the concerned authority.
  • Register the project with FBR before December 31st, 2020.
  • Complete the project before September 30th, 2022.
  • Pay the fixed tax.

And you are all set.

Let’s get into a little details.

Exemption From Declaring Source Of Income

Section 111 of Income Tax Ordinance 2001 deals with the unexplained wealth and assets and treats them as your income for the year.

However, under this scheme you will get the exemption from this section i.e you won’t be asked about the source of investment.

Here is how you can avail this exemption.

Procedure Of Tax Scheme

Here is the procedure of the tax scheme for builders & developers.

For Builders & Developers

Individual

  1. Open a new bank account and deposit all the investment money in.
  2. If you already have land, it must be registered under your name before the introduction of the tax scheme.
  3. Get the Map/Drawing Approval from the concerned authority.
  4. Register the project on FBR’s web portal before December 31st, 2020.
  5. Complete the project before September 30th, 2022.
  6. Pay the fixed tax as per the area.

Association of Persons & Companies

  1. You must be a partner/member of the registered firm/company.
  2. Invest through a banking instrument i.e. cross-check , pay order etc.
  3. In case of land registered under your name, transfer it to the firm/Company before 31st December 2020.
  4. Get the Map/Drawing Approval from the concerned authority.
  5. Register the project on FBR’s web portal before December 31st, 2020.
  6. Complete the project before September 30th, 2022.
  7. Pay the fixed tax as per the area.

For Common Folks

In Case Of Building

  1. Be the first purchaser of the building or the unit of building after the registration of the project.
  2. Purchase it before September 30th, 2022.
  3. Pay through a banking instrument.

In Case Of Plot

  1. Purchase it before December 31st, 2020 through the banking channel.
  2. Start work before December 31st, 2020.
  3. Register it with FBR.
  4. Complete the work before September 30th, 2022.

What We Mean By Work Completed By September 30th, 2022?

  • In the case of a building, the grey structure should be ready.
  • In the case of land development, 50% of the plots booked, 40% sale proceeds received, and 50% of roads are completed.

Exemption Not Allowed

  • Public officeholders
  • Public listed companies
  • Proceeds from money laundering/terror financing

Tax Rate

The fixed tax rate is in three categories depending on the area.

For Lahore, Karachi, and Islamabad

Tax OnTax Rate
Residential Building (Upto 3000 sq.ft)Rs 80 per square feet
Residential Building (Above 3000 sq.ft)Rs 125 per square feet
Commercial Building (Any Size)Rs 250 per square feet
Land DevelopmentRs 150 per square yard
Industrial Land DevelopmentRs 20 per square yard

For Hyderabad, Sukkur, Multan, Rawalpindi, Faisalabad, Gujranwala, Sahiwal, Peshawar, Mardan, Abbottabad, and Quetta

Tax OnTax Rate
Residential Building (Upto 3000 sq.ft)Rs 65 per square feet
Residential Building (Above 3000 sq.ft)Rs 110 per square feet
Commercial Building (Any Size)Rs 230 per square feet
Land DevelopmentRs 130 per square yard
Industrial Land DevelopmentRs 20 per square yard

For All Other Urban Areas

Tax OnTax Rate
Residential Building (Upto 3000 sq.ft)Rs 50 per square feet
Residential Building (Above 3000 sq.ft)Rs 100 per square feet
Commercial Building (Any Size)Rs 210 per square feet
Land DevelopmentRs 100 per square yard
Industrial Land DevelopmentRs 10 per square yard

So, for example in Lahore, if you construct a building of 1360 square feet area (5 Marla house),

The tax amount will be 1360 x 80 = Rs 108,800

And for the same size (5 Marla) commercial building,

The tax amount will be 1360 x 250 = Rs 340,000

This tax will be paid on the annual basis until the project is completed.

Key Points Of The Tax Scheme

  1. The scheme applies to both new and existing projects.
  2. It’s based on a project by project basis.
  3. There is no limit on the amount of investment.
  4. Withhold tax is only payable on steel and cement purchase.
  5. No deductions and losses will be allowed.
  6. No tax credit except under section 236K i.e. the tax paid on the purchase of immovable property will be adjusted.
  7. You have to file the income tax statement and wealth statement thereon.
  8. You can’t incorporate profits more than 10 times the tax paid.
  9. The tax paid will be final.
  10. If you invest in the Naya Pakistan Housing Scheme, 90% of the tax payable will be reduced.

Exemption Of Capital Gain Tax

The Capital gain Tax is waived permanently for the house owners only.

However, exemption is available only if:

  • The House was in use for personal accommodation.
  • The land area is less than 500 square yards (16 Marla) in case of a house and 4000 Square feet (15 Marla) in case of a Flat.

Conclusion

So, that’ the entire story behind the tax scheme for builders & developers.

Though you have to pay tax, still, it’s an opportunity for you to incorporate your wealth and property in the tax net.

If you have any questions, you can ask in the comments section below.

What’s your opinion about the scheme? Do you think it will benefit the economy?

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