ISLAMABAD: The new advance tax imposed on developers and builders would be paid on a project-to-project basis. The Federal Board and Revenue (FBR) has issued an Income Tax Circular to explain the payment of advance tax by builders and developers.

According to the budget explanatory circular, a new sub-section (5C) has been inserted in Section 147 through the Finance Act, 2023, whereby, builders and developers, instead of discharging advance tax liability on the basis of tax payable to turnover ratio, are now required to compute their advance tax liability on the basis of area and size of the building or land development project and the liability so computed will be paid in terms of other provisions of Section 147 of the ordinance.

New advance tax imposed on construction, residential businesses

The rates of tax for the purpose of sub-section (5C) of Section 147 have been provided in Part IIB of the First Schedule to the Ordinance.

The advance tax will be computed by builders and developers on the basis of rates provided in the aforementioned division which will be paid in four equal quarterly installments and shall be paid in terms of sub-sections (5) and (5A) of Section 147.

Furthermore, the builder and developer will compute and pay the advance tax under this section on a project-to-project basis. Rules for the purpose of sub-section (5C) of Section 147 will be notified accordingly, the FBR added.

Copyright Business Recorder, 2023