Islamabad: The Federal Board of Revenue (FBR) has set a seven-day deadline for Commissioners Inland Revenue to issue withholding tax exemption certificates to builders and developers who have discharged their tax liability under the special tax regime.
According to FBR Circular No. 08 of 2025-26 IR-Policy (Income Tax), the new instructions clarify the applicability of withholding tax under Section 236C in relation to persons covered under Section 7F of the Income Tax Ordinance, 2001.
The circular replaces and supersedes earlier Circular No. 7 of 2025-26 dated March 31, 2026, and aims to address procedural delays and clarify exemption mechanisms for the construction sector operating under the special regime.
Under Section 7F, builders and developers are taxed under a fixed-income formula based on gross receipts, rather than traditional income computation methods. The FBR noted that in such cases, withholding tax under Section 236C can create liquidity pressures, particularly where taxpayers do not have additional taxable income for adjustment.
The new directive allows eligible builders and developers who have fully discharged their tax obligations under Section 7F to apply for exemption from withholding tax under Section 236C. Applications are to be submitted to the concerned Commissioner Inland Revenue under Section 159 of the Ordinance.
FBR has directed that Commissioners must process such applications on a case-by-case basis, ensuring all eligibility conditions are met. Importantly, the circular states that if no decision is taken within seven working days of submission, the exemption certificate will be automatically processed and issued through the IRIS system.
The tax authority has emphasized that the measure is intended to streamline administrative procedures and reduce delays in the issuance of exemption certificates while ensuring compliance with legal requirements.
The clarification is expected to ease transaction processes for builders and developers engaged in property sales, particularly under the special taxation framework introduced for the construction sector.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
