Islamabad: Recognizing the crucial role of builders and individuals in driving the nation’s economic development, the government has proposed tax incentives for new construction sector projects.
The budget for 2023-24 highlights that builders will enjoy a tax relief of 10% on their business income for the next three years or up to PKR 5 million. Similarly, individuals engaged in smart construction techniques projects will receive a tax break of 10% or up to PKR 1 million. These tax incentives will come into effect from July 1, 2023.
The government has also proposed increasing the concessional tax rate for banks lending to the construction industry, agriculture, and small and medium-sized businesses to stimulate growth further. Initially applicable from 2020 to 2023, this measure allowed banks to pay 20% less in taxes on loan disbursements.
Furthermore, land developers will be subject to a unique tax structure under the new law. They will be recognized as independent entities and taxed on a project-based basis. Banks and insurance corporations involved in land development will be taxed according to the scheduled system.
The suggested minimum tax rate for land developers is 5% of turnover under Section 113 (Turnover Tax). It is considerably less than the usual 1.25% tax rate for people, associations, and corporations.
By offering tax incentives, the government aims to promote growth in the construction sector, encourage investment, and boost economic activity.