‘Special tax regime for builders, developers’: FBR sets deadline for issuance of WHT exemption certificates

ISLAMABAD: The Federal Board of Revenue (FBR) has fixed a deadline of seven days for Commissioners Inland Revenue for issuance of withholding exemption certificates to developers and builders, who have discharged their tax liability under “special tax regime for builders/ developers.”

The FBR issued Circular No. 08 of 2025-26 IR-Policy (Income Tax) for clarification regarding the applicability of withholding tax under Section 236C in respect of persons covered under Section 7F of the Income Tax Ordinance, 2001.

The FBR has superseded circular number 7 of 2026 dated March 31, 2026.

The FBR’s new income tax circular revealed that the prescribed timelines for the Commissioner and Chief Commissioner regarding the issuance of exemption certificates shall apply ipso facto.

READ MORE: WHT exemption allowed to builders, developers

Provided that an applicant files an application after fulfilling all the conditions precedent to such exemption and the Commissioner fails to take any action within seven working days of filing of such application, such exemption certificate shall be automatically processed and issued by IRIS.

In supersession of Circular No. 7 of 2025-26 IR-Policy dated March 31, 2026 and in order to further clarify the concerns which have been raised regarding the applicability of withholding tax under section 236C of the Income Tax Ordinance, 2001 (“the Ordinance”) to persons engaged in construction and development activities who are subject to tax under the special regime introduced through section 7F of the Ordinance.

Under Section 7F, a special tax regime has been prescribed for certain categories of builders and developers, whereby their income is determined as a fixed percentage of gross receipts. It has been represented that tax under Section 236C is generally adjustable against capital gains arising from such sales. However, in the case of such builders and developers, profits and gains are chargeable under the head “Income from Business” through the special procedure described in section 7F. Consequently, any deduction under Section 236C creates an additional liquidity burden on such taxpayers, especially in cases where the taxpayer does not have any other taxable income during the tax year.

The matter has been examined, and it is hereby clarified that persons who have discharged their tax liability under Section 7F of the Ordinance, and who do not have any other income chargeable to tax under the Ordinance (against which such tax collection can be adjusted), may seek exemption from the collection of advance tax under Section 236C.

Such persons may apply to the concerned Commissioner Inland Revenue under Section 159 of the Ordinance for the issuance of an exemption certificate authorizing the non-collection of tax under Section 236C on their transactions involving the sale of immovable property.

Commissioners Inland Revenue are directed to examine such applications on a case-to-case basis, ensuring that the applicant fulfills all conditions precedent to such exemption, and to decide the matter in accordance with the law, FBR added.

Copyright Business Recorder, 2026