After the stimulus package for construction industry has been promulgated by the President of Pakistan, a new era of developments is going to begin across the country as builders and developers are all set to invest billions in new construction projects. This sector is open for huge investments from all quarters as FBR will not ask for source of funds invested in construction industry under this package.
As this package entails a number of tax amendments and exemptions for a specified time period, it is important to understand how an individual or a company can avail tax benefits by starting off with a construction project under this scheme.
First we need to understand the tax benefits a company or an individual can avail under this package. Then we will discuss the eligibility criteria and how you can avail these tax incentives.
Following tax amendments, benefits and exemptions have been announced by the Federal Government under this stimulus package for construction industry:
Above tax benefits are not meant just for the construction & development companies, but also for individuals who want to buy a plot and build a house or commercial plaza.
There are certain eligibility criteria and guidelines which can help you understand how you can register your project under this scheme. Even if you are not a tax filer till date, you can get yourself or your company registered with FBR and make your investment before 31st day of December, 2020 as per the guidelines given in this ordinance.
Any new construction & development project or existing incomplete project can be registered under this scheme provided that it is registered on IRIS web portal of FBR by or before 31st day of December, 2020.
In case of existing incomplete project, the builder/developer will self-declare the percentage of completed work and pay fixed tax for the remaining part.
The most important part of this scheme is the amendment in section 111 of income tax ordinance which allows you to invest your money without explaining source of funds to FBR. All investments made in construction industry till 31st December 2020 will be exempted from Section 111.
Following conditions must be met in order to be eligible for exemption policy:
Following individuals/companies will not be exempted from section 111 of income tax ordinance (related to unexplained wealth):
You can download complete copy of the Tax Amendment Ordinance 2020 below:
Tax Amendment Ordinance 2020 for Construction Industry
You can read the salient points of the incentive package in Urdu below:
We are quite hopeful that a deluge of black money will be invested in real estate projects in the months to follow that will not only boost real estate prices despite the pandemic blow, but also spur construction activities across the country providing jobs to millions.
Since there is huge demand for low cost houses in the country, builders and developers should also consider developing some low cost residential projects under NPHP. Such low cost units have plenty of potential buyers so the projects will be readily sold and developers will also save 90% on fixed tax.