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ISLAMABAD: The Federal Board of Revenue (FBR) has provided certain incentives to the developers and builders of the construction industry including tax benefits for the real estate investment trust (REIT) schemes under the Finance Act 2021. The Prime Minister's construction package issued through the Income Tax (Amendment) Ordinance, 2021 has also been made part of the Finance Act 2021.

According to the explanation of the Finance Act 2021 issued by the FBR, the income of REIT schemes is exempt from tax under clause (99) of Part I of Second Schedule subject to conditions and limitations prescribed therein.

The REIT schemes have been provided following further concessions: The gain arising on the disposal of immoveable property to development and residential REIT is exempt upto 2023. Now this exemption has been extended on disposal of immoveable property to all types of REITs. The rate of tax on dividend income from REIT scheme was 25 percent. It has been reduced to 15percent.

Necessary changes have been incorporated in the schedules. The income tax explanatory circular issued by the FBR revealed that the builders and developers have been provided fixed tax regime and immunity from probe for sources of investment subject to conditions and limitations provided in section 100D and Eleventh schedule of the Income Tax Ordinance 2001. They have been further allowed to incorporate profits from such projects equal to 10 times of the taxes paid under fixed tax regime.

The income in excess of 10 times was chargeable to tax at the normal applicable rates Now changes have been introduced in Eleventh schedule to the effect that the income of builders and developers from such project in excess of 10 times of tax paid shall be chargeable at reduced rate of 20 percent.

The FBR's circular 2 of 2021 further stated that the Finance Act, 2021 has brought about certain amendments in the Income Tax Ordinance, 2001. Some significant amendments included incorporation of Ordinances in Finance Act, 2021. During the currency of financial year 2021-22, three Ordinances were issued. These have been made part of Finance Act, 2021.

One of the said three Ordinances was Income Tax (Amendment) Ordinance, 2021. It was issued to extend certain deadlines under section 100D and Eleventh Schedule under Prime Minister's construction package.

Finance Act 2021 has amended the section 100D of the Income Tax Ordinance 2001. The section 100D has prescribed a scheduler based fixed tax regime for Builders and Developers on the basis of project area in respect of their income from sale of building or sale of plots, for tax year 2020 and onwards.

According to the Finance Act 2021: (35) in section 100D,- (a) for the expression "30th day of September, 2022", wherever occurring except for clause (a) of sub-section (4), the expression "30th day of September, 2023" shall be substituted; (b) in sub-section (1), in clause (b), in the proviso, after the figure "2019", the expression "or tax year 2020, as the case may be" shall be inserted; (c) in sub-section (3),- (i) for the expression "31st day of December, 2020", wherever occurring, the expression "30th day of June, 2021" shall be substituted; and (ii) in clause (c), after the word "portal", the expression "by 30th day of June, 2021" shall be added; (d) in sub-section (4),- (i) in clause (a), for the expression "30th day of September, 2022", wherever occurring, the expression "31st day of March, 2023" shall be substituted; (ii) in clause (b),- (I) in sub-clauses (i) and (ii), for the expression "31st day of December, 2020", wherever occurring, the expression "30th day of June, 2021" shall be 69 substituted respectively; and (II) in sub-clause (iii), for the expression "31st day of December, 2020", the expression "31st day of December, 2021" shall be substituted; and (e) in sub-section (9),- (i) for the expression "31st day of December, 2020", wherever occurring, the expression "31st day of December, 2021" shall be substituted; and (ii) in clause (d), in sub-clause (iv), after the figure "2019", the expression "or tax year 2020 at the option of the taxpayer" shall be added, Finance Act 2021 added.

Copyright Business Recorder, 2021

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