Special provisions related to builders and developers have been introduced by the Federal Board of Revenue (FBR).
The Federal Board of Revenue (FBR) has introduced significant amendments to the Income Tax Ordinance, 2001, particularly in Section 100D, outlining special provisions for builders and developers. The revisions, incorporated through the Finance Act of 2021, aim to streamline and digitize the taxation process for this sector.
Key Provisions of Section 100D:
1. Project-Based Taxation:
• Effective from the tax year 2020 onwards, builders and developers opting to pay taxes under Section 100D will have their tax liability computed and paid on a project-by-project basis.
• The taxation covers income, profits, and gains derived from the sale of buildings or plots, either from a new project to be completed by September 30, 2023, or from an incomplete existing project with the same completion deadline.
2. Digital Issuance and Verification:
• The ordinance emphasizes digitalization by requiring electronic Proceeds Realization Certificates (ePRCs) for funds received from abroad through Authorized Dealers (ADs).
• Guidelines for the automated issuance and verification of ePRCs and S-PRCs (Statement of PRCs) have been provided in the Eleventh Schedule.
3. Restrictions on Tax Benefits:
• Builders and developers opting for Section 100D face restrictions, including no tax credit against the payable tax except for specific scenarios outlined in the ordinance.
• Deductions under other sections of the Income Tax Ordinance are not allowed for income covered by Section 100D.
4. Conditions for Capital Investment:
• Section 100D outlines conditions for capital investment in new projects, specifying deadlines for deposits and transfers of money or land.
• Investors are required to submit a prescribed form on the Iris web portal by June 30, 2021.
5. Exemptions and Refunds:
• Certain exemptions are provided for the first purchaser of a building or unit, subject to conditions such as full payment through a crossed banking instrument.
• Refunds of tax collected or deducted under this section are explicitly disallowed.
6. Misrepresentation and Void Returns:
• Section 100D introduces measures to address misrepresentation or suppression of facts in returns or declarations.
• Void returns resulting from misrepresentation may lead to the application of all provisions of the Income Tax Ordinance.
7. Exemptions for Certain Entities:
• Public officials as defined in the Voluntary Declaration of Domestic Assets Act, 2018, and entities involved in criminal offenses, excluding offenses under the Income Tax Ordinance, are not eligible for the benefits of Section 100D.
Conclusion: The amendments introduced in Section 100D represent a significant shift in the taxation framework for builders and developers, emphasizing digital compliance and project-based taxation. These changes are expected to enhance transparency, reduce manual processes, and encourage timely completion of construction and development projects. Builders and developers are urged to familiarize themselves with the updated provisions to ensure compliance with the new tax regulations.
(Disclaimer: The information provided here is for general understanding, and individuals are advised to refer to the official documentation for accurate interpretation and compliance.)
