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Long-term contracts
(1) A person accounting for income chargeable to tax under the head Income from Business on an accrual basis shall compute such income arising for a tax year under a long-term contract on the basis of the percentage of completion method.
(2) The percentage of completion of a long-term contract in a tax year shall be determined by comparing the total costs allocated to the contract and incurred before the end of the year with the estimated total contract costs as determined at the commencement of the contract.
(3) In this section, — long-term contract means a contract for manufacture, installation, or construction, or, in relation to each, the performance of related services, which is not completed within the tax year in which work under the contract commenced, other than a contract estimated to be completed within six months of the date on which work under the contract commenced; and percentage of completion method means the generally accepted accounting principle under which revenue and expenses arising under a long-term contract are recognised by reference to the stage of completion of the contract, as modified by sub-section (2). PART V HEAD OF INCOME: CAPITAL GAINS
(2) The percentage of completion of a long-term contract in a tax year shall be determined by comparing the total costs allocated to the contract and incurred before the end of the year with the estimated total contract costs as determined at the commencement of the contract.
(3) In this section, — long-term contract means a contract for manufacture, installation, or construction, or, in relation to each, the performance of related services, which is not completed within the tax year in which work under the contract commenced, other than a contract estimated to be completed within six months of the date on which work under the contract commenced; and percentage of completion method means the generally accepted accounting principle under which revenue and expenses arising under a long-term contract are recognised by reference to the stage of completion of the contract, as modified by sub-section (2). PART V HEAD OF INCOME: CAPITAL GAINS
Amendment history (4)
- Inserted by the Finance Act, 2012.
- Sub-section (1A) substituted by the Finance Act, 2022. Substituted sub-section (1A) reads as
- The expression “sub-sections (3) and” omitted by the Finance Act, 2022.
- Sub-section (3) omitted by the Finance Act, 2022. Omitted sub-section (3) reads as follows
Amendment notes captured from the source page(s); they may include changes to neighbouring provisions.
Source FBR PDF page 88
Unofficial reference, compiled from the FBR’s consolidated Income Tax Ordinance 2001 (amended up to 30 June 2026). Provided for general information only — not an official FBR publication and not legal or tax advice. Always verify against the official FBR text before relying on it for filing or any decision.