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:
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:
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.