New Policies for Construction Industry of Pakistan

Last month, the Federal Government of Pakistan had announced a historic relief package for the construction industry. This package was a need of time, especially during the ongoing coronavirus pandemic across the globe, as it will boost our economy.

This package will encourage construction and incentivize economic growth for the daily wagers. Construction relief package will bring more investment in the construction and real estate sector, and also provide more business opportunities to potential investors. This relief package will offer incentives for those looking to construct. It will improve the rate of infrastructural development and progress within the nation. The significant benefit to the country will be of generating employment and stirring incomes in households among low-income families.

New Policies and Amendments Details of Construction Relief Package 2020

No one will ask about the source of income of the investors investing in any of the construction projects.

The government will introduce a fixed tax in the Budget of 2020.

An investor invests in any project under the NPHA will only pay a 10% tax.

The exemption of withholding tax on construction is made for all sectors, except steel and cement.

A family selling their house will be free of paying any capital gain tax.

The government will charge the tax as per square foot or square yard.

Also, a subsidy of Rs. 30 billion announces for Naya Pakistan Housing Authority project.

In coordination with all the provinces, the government also reduces the Sales Tax for the construction industry.

The government has set up a Construction Industry Development Board to check and improve construction industry performance.

The government also reduces the ratio of taxes for the construction industry.

The holding period of the constructed property for ascertaining Capital Gain Tax reduces from four to three years. However, the holding period of plots remains for eight years.

Builders and developers will be eligible to take credit or impute incomes that equal to 10 times of tax paid under this policy but after declaring their net worth.

One of the main features of this package is that any person who wishes to invest under this scheme until 30 June 2022 will be exempt from Section 111 of the Income Tax Ordinance 2001. The investment can be in a house, commercial building, and plots or can be a construction of a structure or semi-built nature.

Furthermore, individuals will be free from taxes on the first purchase of a newly constructed property as well as on the construction of any structure on already owned land.

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