KARACHI: The Federal Board of Revenue (FBR) has prepared the draft of Income Tax Special Procedure Rules for Builders and Developers in a bid to provide relief and support to the industry.
According to the draft, income computed and tax payable thereon will be on project-by-project basis under the head Income from Business. According to the proposal, rate of tax on builders will be Rs210/sq ft for commercial building across the country.
The rate of tax on builders for residential buildings has not been finalized as yet. However, there will be three slabs of tax on the basis of acreage of the property. First slab is proposed to be up to 750 sq ft; second slab is from 751 sq ft to 1500 sq ft and third slab is 1501 sq ft and more.
The rate of tax for commercial plots is proposed to be Rs210/sq ft across the country.
The rate of tax on residential has not been finalized as yet. However, there will be three slabs of tax on the basis of acreage of the property. First slab is proposed to be up to 120 sq yd; second slab is from 121 sq yd to 200 sq yd and third slab is 201 sq yd and more.
In case of low cost housing the above mentioned rates would be reduced by 90 percent. The properties across the country have been classified into three categories. Category-A include properties in Karachi, Lahore and Islamabad. Category-B includes properties in Hyderabad, Sukkur, Multan, Faisalabad, Rawalpindi, Gujranwala, Sahiwal, Peshawar, Mardan, Abbotabad and Quetta. Category-C includes urban areas not mentioned in Categories A and B.
The above referred rates would be applicable to compute tax liability for the project for the tax years when the respective project is under construction. The annual tax liability will be worked out by dividing the tax liability as per the mentioned rates by three years.
A person opting for this scheme shall neither be entitled to claim any adjustment of withholding tax collected or deducted nor shall be entitled to claim any tax credit or refund under the Ordinance, except for the payment made under these rules.
An association of persons shall be liable to tax separately from the members of the association. The amount received by a member of the association in the capacity as member out of the income of the association shall be exempt from tax.
In case of the builder or developer is a ‘Company’ income subject to these rules shall be treated as a separate ‘class’ of income subject to these rules.
Tax payable under this Rule shall be paid in the State Bank of Pakistan or authorized branches of National Bank of Pakistan by the due date for filing of tax return.
Every builder or developer shall be required to obtain and provide to the FBR a certificate from NESPAK regarding covered area in the project; and clarification of the kind of construction, if so required. Any project with a covering area less than 5000 sq.ft. would not require such approval.
Examination of assessment under this scheme shall be limited to activities and purposes within this scheme. The process, procedure and reporting of examination shall be prescribed.
Where a person in respect of income is selected for examination under this scheme, the process of examination shall be undertaken not allowing any personal visit by any tax authority to the premises of the taxpayer, except with the approval of Federal Board of Revenue.
No examination shall be undertaken after the expiry of five years from the date of filing the Return for that tax year. No action under this Rule will be undertaken prior to the approval of a Committee constituted by FBR consisting of three persons including a representative body of builders or developers; including actions on account of any ‘definite information’ as laid down under sub-section (8) of section 122 of the Ordinance.
Moreover, a builder or developer will not be required to act as a withholding agent under any provision of the Ordinance, except under Section 153 on purchase of steel, cement and electrical equipments and on taxable salaries.