The government has made the decision to offer incentives to builders and persons engaged in the construction of new homes and buildings in light of the significant role that the construction industry and related businesses play in the economic development of the nation.
For the following three years, the government has planned to grant builders a tax break of 10%, or Rs. 5 million, on their company income.
Individuals will also receive a similar incentive; they will receive a tax break of 10%, or Rs. 1 million, for the following three years. Construction projects beginning after July 1, 2023, will be eligible for the tax exemption.
The government had instituted a reduced rate of taxation to support the small and medium-sized businesses (SMEs), agriculture, and construction industries.
In contrast to the regular rate of 39 percent, the revenue earned by banks from loans made to certain sectors was to be taxed at a favorable rate of 20 percent.
The administration has suggested extending this program for a further two years, or until 2025, as the reduced tax rate was set to expire this year.
Special Tax Regime for Land Developers
Land developers would be subject to scheduler taxes just like banks or insurance companies. Businesses involved in land development will be taxed separately and on a project-basis under a unique schedule.
The recommended minimum tax rate under Section 113 (Turnover Tax) is 5 percent of turnover. The standard tax rate that applies to people, AOPs, and businesses is 1.25%. It is suggested to use Project Advance Tax.
When a Layout Plan (LoP) is originally approved, the approving authority will collect advance income tax at a rate of 7.5% of the land’s fair market value at FBR Table value, which will then be adjusted three years later to predict future annual income tax liabilities.
