A builder or developer has option to be taxed under normal tax regime. However, there is a special arrangement, where builder/ developer can opt for Final Tax Regime, whereby section 100 D and 11th schedule will be applicable.
Under this option, following are features:
- A builder/ developer shall register project at FBR Iris till 31 December 2021.
- Estimated project life shall not exceed 3.5 years and from tax year 2020, this estimated life will be 4 years.
- Tax shall be paid in each year based on the formula stating as below:
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- Tax liability as per the rates prescribed /Estimated project life in years.
In most cases, 25% of the tax liability will be paid in each year by using above formula.
- No deduction of expense shall be made or set off of any loss, other than advance tax paid at the time of purchase of immoveable property.
- No refund of other withholding tax allowed.
- Minimum tax and Alternative Corporate Tax provisions will not apply.
- In case of builder, completion of project will be certified by map approving authority or NESPAK stating that grey structure has been completed.
- In case of developer, relevant authority / local development authority will certify that landscaping has been completed till 30 September 2023 and at least 50% of roads have been laid up to subgrade level.
- Audit firm with QCR rating by ICAP shall certify that at least 50% of plots have been booked and at least 40% of sale proceeds have been received by 30 September 2023.
- Immunity for builder: In addition to other conditions, Builder will not be asked for unexplained investment if two conditions are met. First cash shall be deposited in a new bank account till 30 June 2021 and ownership documents of land must be there by 19 April 2019 ( at the time of start of the amendment in laws).
- Immunity for first purchaser: Purchaser will not be asked for unexplained investment (section 111) for first purchase of building if payment is made through banking channel till 31 March 2023.
- Immunity for purchaser of plot who intends to construct a building thereon. In such case, payment must be made by 30 June 2021 and construction be started by 30 June 2021 and must be completed by 30 September 2023.
- Dividend income paid by builder/ developer as being company out of profits of a project is exempt from tax.
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