Property Values to Be Set by SBP, Buyers & Sellers to Suffer Huge Taxes

The Federal Board of Revenue (FBR) has said that the amendments introduced through Finance Act 2016 will require a builder, land developer, house owner or property dealer to pay a fix final tax based on the specific rate of city and its area, which will be set by SBP. The law is applicable on all projects approved after 1st July 2016 and on property acquired within the last 5 years.

The main changes in the amendment are listed below:

  • The Commissioner no longer has the power to value a property. The task will be handled by SBP approved panel of “valuers”. The binding nature of value determined by provincial revenue authorities for collecting stamp duty has also been revoked.
  • Section 15 says that income tax will be charged based on “gross income basis” instead of “net income basis” for individuals as well as Association of Persons (AOP) as a separate block of income tax.
  • Property rental receipts will now be charged under section 15A with no deductions of allowances allowed. Final discharge of tax liability will be based on Section 155 for individuals and AOPs.

All taxes will be based on the value of property prescribed by the District Collector. And no property can cost less than that. The new tax rates have been simplified and listed below:

  • For sellers, Withholding tax (WHT) on transfer of immovable property has been increased 1% for filers and 2% for non-filers. This tax is only applicable if the property was acquired within last 5 years.
  • For buyers, Withholding tax (WHT) on transfer of immovable property has been increased to 2% for filers and 4% for non-filers.
  • For land developers and sellers, capital gain tax will be applicable when disposing /selling an immovable property which was acquired within the past 5 years. Income will be taxed at 10%, double of what it used to be. Previously, people were charged 5% if the property was 1 year old and 10% if it was two years old and the rest was tax-free.
  • Withholding Tax (WHT) rates for rent payers and landlords have also been mentioned in Division VI and Division V respectively. The rates have been listed as tables in the document.
  • Income derived from property including rental income for individuals or Association of Persons (AOP) will not be taxed if it is lower than Rs. 200,000 and the filer has no other source of income.
  • Gains through the disposal of immovable property by a person in a tax year to a Rental REIT Scheme will be taxed at 5% up to 30th June 2019.
  • Property income by companies will continue to be taxed at the existing rates and regulations.

Prior to this financial act, people and construction companies used to claim excessive expenses by declaring receipts which were somewhat suppressed. This has resulted in very little revenue in this sector up until now. By applying withholding tax, which is refundable if there is no payable income tax, the government will get another source of advance tax. Most people often don’t go through to have these taxes refunded and this means more for the government.

Another aspect of the amendment is that it could help curb the process of legalizing black money. Criminals used to buy property and show it as cheap. When it was sold, the price was misquoted higher than it was in reality and black money was distributed among the buyer and the seller.

However, there still remains the problem of the sale of property files. People who acquire property from different housing schemes can still sell their property, which is acquired on installments at higher rates and there is no mention of any amendment so far which can cater to this segment.

The new amendment could also help regularize property rates as a panel will decide the price of each city and its different areas. Property prices will become similar in each area of the city and overcharging or undercharging might be completely out of the question.

He is the Editor-in-Chief at ProPakistani. Reach out at aadil.s[at]

  • this is bullshit man….. recently somone transfered a plot to his son and the taxes and the bullsht was 6 lac rupees for one kanal plot (3 4 months ago) and do it have to rise more?

    Logo ka paisa haram ka hai jo govt. ko 20 20 lakh tax dain buyer b aur seller b day…. aur in politician ki pocket m???

    gareeb insan ek ghar b nahi bana skta in ki wajah se this is utter injustice and people have to stand for this coz if they dont tmorrow taxes will be equal to the value of property…. prices will rise and the country will ruin…… why dont people stand for this humongous cause..?? if we dont stand up its gonna fall back on us…. ultimately everyone whether a student or a co-oprate worker a buissness man or a person with kiriyana shop wishes to build a house for himself first and this is like hitting the foundations of society… increasing poverty and eating up alll the money and storing in the swiss bank accounts…

    • I believe think there is any Tax when you get property from Parents. I got property after my father passed away earlier this year, and there was no Income or Withholding Tax. I had to only Pay transfer fees.

      • Dear, Previously legacy property was transferred free, minor charges was charged just in thousands and NOW there are huge taxes on it. We need to sell our half property to get remaining property our own names.

  • And now govt want to ruin this industry like they did to Railways, PIA and others.
    Whats next
    I think softwares and IT

    • this industry was already ruined. too much hype in prices. a middle class person can’t even think bout buying a property for his own house in even some rural place. and yes your’re right before they go, they’ll make sure that software industry is not on its feet rather under the feet and crushed.

    • this industry is ruining Pakistan. Land Mafia purchasing (or snatching) green fertile lands and converting them to so call housing schemes. There should be some laws. Poray mulk ko housing scheme bana do ge tou fasalein kahan lagao ge? This needs to be stopped. Nobody should be allowing to built a housing scheme on green fertile lands. Else it will be disaster for the future of Pakistan.

  • Ao na property bechanay ab khusbo laga kay!

    And these pathetic/sick/retards will still get vote from same pathetic mind people to rule our country.

  • Dar is foreign agent destroying every industry… And now real state… The best businesses in Pakistan is to sell chars heroin,, or do smuggling…!!

    • Meanwhile his own estate business in dubai is shining above all. Similar to Nawaz steel mill printing money day and night while Pakistan steel mill is closed since years. Those who choose them also should be questioned for their choices.

  • Finally something good. DC rates show 20L per Kanal in DHA, lets see if any property dealer will get you a Plot in DHA for that money. This was a mockery of the system. Guy who loads Rs. 100 balance on his Mobile was paying more Tax then those who were buying Multi Million Rupees Plots (in terms of Percentage).

    • Lolz,,,, See by yourself in next few months. These tax thieves are not going to pay any TAX sooner or later. these are LAW makers they always left a backdoor in law to exploit these. It is only the common man who suffers.

    • Eventually only regular dudes buying 5 Marla 10 Marla plots from their hard-earned blood and sweat money will be paying taxes. While others with solve this matter via approaches or under the desks otherwise.

  • I think this was old story?
    And all property dealers associations did hartal on this procedure of valuations.
    The new change things are to be come in few days
    This was old story

  • Your man behind all these ideas, are Mr, Ishaq Dar (a true lanti and haramkhor written of his forehead) until he is not removed from his seat. get ready to be taxed on things you can even imagine. toilet tax, air tax, fart tax, janaza tax, tea drinking tax, excessive toilet using tax and more.

    De do yar bechare ko, kuch new businesses bhi tou shru karne hai ishaq sahab ne apne beto ke liye dubai main :P

  • Yesterday I spoke to a rikshaw driver in Lahore and he turned out to be a PPPP supporter just bcz thy used to get him out of police station in case of any larai and he used to get his petty things solved such as chalan evasion, government office works etc. Now, if this is the mentality of our people then I guess these leaders are doing their job perfectly.

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