The country is standing today due to the many sturdy pillars holding the foundation in place. The real estate sector is an important pillar of this foundation, its stability and success directly ensures the stability of the country. There have been many problems that have arisen as a result of the role of real estate in supporting the economy of our country.
Imran Khan’s Ingenious Initiative
Our Prime Minister recognizes the real estate sector for what it is, a pillar that has weathered many storms during the course of time. He has introduced a relief package for the real estate sector.
Ever since the pandemic took its toll on Pakistan, the wheel of the economy has halted, people lost their jobs, and the laborers were in the worst state.
Imran Khan knew that since the real estate industry engages most of the labor in Pakistan, so if this industry is given the wings it deserves, the problems of the people will be solved. He has made the real estate sector tax-free like Capital Smart City, let us see how.
Relief Package for the Real Estate Industry
The relief package is a historical one. It consists of a tax cut on property.
- First of all, whoever invests in this sector throughout the year, will not be questioned nor annoyed by the notices or regulations of the FBR.
- The government declared the fixed tax scheme under the umbrella of the relief package, taking on board 163 projects worth PKR 136 billion and partnering with the Federal Board of Revenue (FBR). Investors in FBR-registered projects have been exempted from reporting their sources of income, according to the document.
- The government is also providing a subsidy with a budget of PKR 30 billion for the development of low-cost housing. People who construct 5-marla and 10-marla will pay a difference of 5% and 7% subsidized interest rates. The subsidy would cover the interest paid on a loan used to construct low-cost housing.
The relief package has not only lifted the real estate sector, but every other that is interlinked with it.
Special Incentive Package for Construction Sector
Via appropriate amendments to the Ordinance, the building industry was considered an “industrial undertaking.” As a result,
- The industry can now request an exemption from the advance tax that would otherwise be levied on machinery imports.
- All provinces are required to exclude building facilities from sales tax if the builders and developers are subject to a fixed rate of sales tax.
- All provinces must exclude low-cost housing entirely from sales taxes.
Tax Cuts on Capital Gains
Capital Gains Tax is the money due to the government by the seller. The amount is charged at the time the property is sold. The tax is imposed on the sellers’ land.
The seller was required to pay Capital Gains Tax after three years. But thanks to the proposed amendments, not anymore. If someone wishes to sell their house out, there will be no Capital Gain Tax for him to pay. This means that the profit gained will belong to you and you only, the government will not ask for tax on it. It is an incentive worth millions of Rupees. Learn about Nova City Islamabad!
Builders and Developers are Subject to a Special Tax Regime.
To incentivize builders and developers, a fixed tax regime has been proposed effective from the year 2020. Under the new regime,
- Income would be handled as if it were a separate block. The tax liability for builders will be determined by the cost per square foot of a building, while the tax liability for developers will be determined by the cost per square yard of land production.
- Previously under section 153 of the Income Tax Ordinance, 2001, all builders and developers, regardless of their legal status, were forced to withhold tax. But now, builders and developers are proposed to be excluded from withholding taxes on the purchase of construction materials, with the exception of vendors selling steel and cement and offering facilities (such as plumbing, shuttering, and so on) that are not provided by the businesses.
- The builders and developers are required to include in their wealth statements a considered benefit equal to ten times the tax paid calculated on an imputable basis.
Incentive for Naya Pakistan Housing Scheme (NAPHDA)
The Naya Pakistan Housing Scheme is a project of the Pakistan Tehrik-e-Insaf-led government, which aims to provide housing for the homeless, boost economic activity in the region, and provide job opportunities for the youth.
If the citizens wish to invest in NAPDDA, they can avail a 90% rebate on the tax amount.
Tax Cuts to Combat Covid-19 Crisis
The Punjab Government has announced tax incentives in light of the pandemic crisis. Previously, there was a 5% tax on the construction services without the input tax/credit adjustment and a 16% with the input. Currently there is a 0% tax with any input tax adjustment.
Additional Steps at the Provincial Level to Ensure Ease of Doing Business
The provinces will take the following additional measures to ensure ease of doing business for the construction industry’s status:
- Rapid master planning and zoning development
- Rapid master planning and zoning development
- Provinces must quickly implement fully automated one-window portals for processing approvals and other services.
Conclusion
We are witnessing the beginning of a new era for real estate, a tax-free sector. The Prime Minister has secured the trust of the nation with his proposed amendments. The ruin that came with the global pandemic is combatted skillfully. It is safe to say that the tax-free sector of real estate is going to be unexcelled, unlike ever before.
Author Bio
M Junaid Lead Writer, Content Marketer at Sigma Properties [Real Estate], A writer by Day and reader by night
