The Federal Board of Revenue (FBR) is exploring the possibility of imposing a luxury tax on big houses located in the posh residential areas in the coming budget (2022-23), it is learned.
Sources told ProPakistani that the FBR is examining whether the federal government can impose such a luxury tax on immovable properties. “What kind of federal tax could be imposed on such big properties owned by rich people?”. The legal aspects of the proposal are being reviewed but nothing is final in this regard.
In the Finance Bill 2013-14, the Punjab government had levied a luxury tax on residential houses located in a part of the rating area of Punjab Urban Immovable Property Tax Act 1958 at the following rates:
- Residential house measuring two kanals & above but less than four kanals: Rs. 0.5 million
- Residential house measuring four kanals & above but less than eight kanals Rs. 1 million
- Residential house measuring eight kanals and above Rs. 1.5 million.
The provincial government has clarified as under: In the case of an existing house, the luxury tax shall be paid within a year commencing from the first day of July 2013 in four equal installments before the expiry of each of the four quarters of the year.
Where an installment of the luxury tax is not paid within the prescribed time, a surcharge equal to two percent of the outstanding tax per month shall be paid and where a surcharge is paid during a month, the surcharge shall be prorated on daily basis for the days of the last month in default.
The tax levied under subsection (a) shall be paid on a one-time basis provided that where a taxable house is constructed after the commencement of this Act, the luxury tax shall be likewise paid on a one-time basis within one year of the completion of construction of such house.
A residential house, measuring not exceeding four kanals owned by a widow and in which she is residing, shall be exempt from the payment of the luxury tax levied under subsection (a) Provided that where a widow owns more than one house.
Where the luxury tax has not been levied on a house owned by a widow, the whole amount of tax shall be payable on such house by her legal heirs or any other transferee not being a widow within one year of her demise or transfer.
In case of house liable to luxury tax under subsection (a) is registered in the name of a minor, the liability to pay the luxury tax shall be on the parents or the guardian of the minor. No tax shall be levied, charged, or paid in case of a house that is sold or transferred after the payment of the luxury tax once due thereon.
Later, the Lahore High Court (LHC) cancelled the luxury tax notices that the Punjab government had served on the owners of 2 kanal or bigger houses.
The provincial government had imposed luxury tax by amending Section 8 of the Finance Act and later withdrew it after the tax was challenged in court. The provincial government had levied a luxury tax on houses located in areas specified as Category A under the Punjab Urban Immovable Property Tax Act, 1958.
good move