Under the Budget 2023-24, Tax Relief Will Be Provided To Builders Engaged In New Construction Projects
The government has unveiled a range of incentives for builders and individuals involved in new construction projects, acknowledging the crucial role played by the construction and related industries in the country’s economic progress.
As part of these new measures, builders will receive a tax relief of either 10 percent or Rs. 5 million on their business income for the next three years. Similarly, individuals undertaking construction projects will enjoy a tax relief of 10 percent or Rs. 1 million for the same duration. These tax benefits will be applicable to projects commencing after July 1, 2023.
To further boost growth in the construction sector, agriculture, and small and medium-sized enterprises (SMEs), the government had previously introduced a reduced tax rate for banks providing loans to these sectors from 2020 to 2023.
This scheme allowed banks to be taxed at a lower rate of 20 percent on the income generated through loans to these sectors, instead of the standard rate of 39 percent. Although the concessional tax rate was initially set to expire this year, the government has proposed extending it for an additional two years, until 2025.
Special Tax Regime for Land Developers
In addition to the tax incentives mentioned above, the government has introduced a special tax regime for land developers. They will be treated as separate businesses and taxed based on their projects.
Under this new system, land development businesses, including banks and insurance companies in Pakistan, will be subject to scheduler taxation. The proposed minimum tax rate for land developers is set at 5 percent of turnover, as per Section 113 (Turnover Tax). This rate is significantly lower compared to the standard tax rate of 1.25 percent applicable to individuals, associations of persons (AOPs), and companies.
Furthermore, a Project Advance Tax is proposed, wherein the Approving Authority will collect an advance income tax of 7.5 percent of the fair market value of the land at the FBR Table value upon the first approval of the Layout Plan (LoP). This amount will be adjusted over three years against the yearly income tax liability of the project.