ISLAMABAD, April 15, 2026 —Federal Board of Revenue (FBR) on Wednesday issued revised guidelines for tax collection from builders and developers, aiming to address industry concerns over withholding tax applicability and ease liquidity pressures.
The clarification was issued through Circular No. 8 of 2025-26 (IR Policy Income Tax), superseding an earlier directive dated March 31, 2026. The move seeks to remove ambiguities surrounding the application of advance tax under Section 236C of the Income Tax Ordinance, 2001 for taxpayers operating under the special regime defined in Section 7F.
Under Section 7F, certain categories of builders and developers are taxed under a simplified framework where income is calculated as a fixed percentage of gross receipts, rather than on conventional profit determination. However, industry participants had raised concerns that withholding tax collected under Section 236C—typically adjustable against capital gains—created an additional financial burden for such entities.
The FBR noted that, since builders and developers under Section 7F are taxed under “Income from Business” through a special mechanism, the adjustment of withholding tax may not always be feasible, particularly in cases where taxpayers have no other taxable income streams during the year.
To address this issue, the tax authority clarified that eligible taxpayers who have fully discharged their liabilities under Section 7F and have no additional taxable income may apply for exemption from advance tax collection under Section 236C.
Such taxpayers can submit applications to their respective Commissioners Inland Revenue under Section 159 of the ordinance, requesting exemption certificates that would allow the non-collection of tax on transactions involving the sale of immovable property.
The FBR directed Commissioners to evaluate applications on a case-by-case basis, ensuring that all legal requirements are fulfilled before granting exemptions. It further emphasized adherence to prescribed timelines for processing such requests.
Importantly, the circular introduced an automated safeguard mechanism: if the Commissioner fails to act within seven working days of receiving a complete application, the exemption certificate will be automatically issued through the IRIS system.
Analysts say the clarification is expected to provide relief to builders and developers by improving cash flow and reducing procedural uncertainty, potentially supporting activity in Pakistan’s construction and real estate sectors.