FBR Introduces New Tax Regulations for Builders

The Federal Board of Revenue (FBR) has implemented new regulations affecting builders and developers in the construction industry. These changes are part of the amended Finance Bill 2024, aimed at ensuring a more efficient collection of taxes on taxable profits from construction activities.

Under the revised bill, fixed taxable profit rates have been set at 10%, 15%, and 12% for different types of construction and development projects. The new Section 7F of the Finance Bill 2024 specifies that individuals earning income from constructing and selling residential, commercial, or other buildings, as well as developing and selling plots, will be subject to this tax.

For tax calculation purposes, taxable profit is determined as 10% of gross receipts for specific activities, 15% for designated activities, and 12% for further specified activities. It is crucial to understand that this tax only applies to income generated from the mentioned activities and not from any other sources of income.

Moreover, taxpayers are not allowed to claim credit for amounts exceeding the taxable profit when disclosing the nature and origin of credited sums or investments. However, if the taxable income under Section 9 exceeds the taxable profit under this section, taxpayers can claim credit for such income, provided they follow the tax rates specified in the First Schedule.

It is important to note that these regulations do not apply to builders or developers established by legislative bodies or Presidential Orders, who are engaged in activities benefiting their employees or in housing and infrastructure development within specified areas.

The introduction of minimum profit rates for builders and developers by the FBR is a significant step towards ensuring fair taxation in the construction sector. These measures aim to streamline tax collection processes and promote transparency in income reporting. By adhering to these regulations, builders and developers can contribute to the country's economic growth while fulfilling their tax obligations responsibly.