The government has imposed a major condition on the sellers or transferors of immovable properties to prove before the registration/transfer authorities that tax has been paid under section 7E (tax on deemed income) of the Income Tax Ordinance 2001.
The condition has been imposed under a new provision introduced through the Finance Bill 2023.
The persons responsible for registering, recording or attesting transfer of any immovable property shall not register, record or attest transfer unless the seller or transferor has discharged its tax liability under section 7E of the Income Tax Ordinance 2001.
According to the sub-section (2A) introduced under the Finance Bill 2023, notwithstanding anything contained in any other law, for the time being in force, any person responsible for registering, recording or attesting transfer of any immovable property shall not register, record or attest transfer unless the seller or transferor has discharged its tax liability under section 7E and evidence to this effect has been furnished to the said person in the prescribed mode, form and manner, the new provision added.
For tax year 2022 and onwards, a tax shall be imposed at the rates specified in Division VIIIC of Part-I of the First Schedule on the income specified under section 7E (tax on deemed income) of the Income Tax Ordinance 2001.
A resident person shall be treated to have derived, as income chargeable to tax under this section, an amount equal to 5 percent of the fair market value of capital assets situated in Pakistan held on the last day of the tax year excluding laid down situations.
can anyone explain what this jargon actually means in simple terms. they want to implement something which even lawyers struggle to understand. what a country of incompetence we live in.
Fully agree. For a country that has high illiteracy rates it sure does like to use legal jargon that average Pakistani lawyer wouldn’t be able to understand let alone its citizens. It’s all designed to hoodwink the Pakistani people that’s all. Pakistan is held to ransom by these parasites who run the country.
Any person who is a resident Pakistani and has an immovable property under his/her name is bound to pay tax upon transfer/registration of that property, that shall be 5% of the fair market value of the property
Section 7E:
1. Resident person has more than one property or properties, either plots, houses, agriculture land, farmhouses, flats etc. not used for business or agriculture purpose (there are certain exemptions available to self-resident house, land used for agriculture business, plots allotted to shaheed/govt. employees/armed servicemen, tax u/s 236K already paid in same tax year etc.)
2. Additional eligible properties have total/aggregate market value of Rs. 25 Million or more.
3. Income will be calculated as 5% of fair market value of the total value of properties.
4. Tax will be payable at the rate of 20% of the above calculated income.
Example – 1:
Ali owns one house in which he is residing with family worth Rs. 10 Million. He also owns a plot of 5 Marla in a housing society with fair market value of 5 Million. Ali also owns agriculture land in his village with fair market value of 10 Million.
Own House Not taxable
5 Marla Plot 5 Million
Agriculture land 10 Million
Total 15 Million
As aggregate value is less than 25 M, therefore, no tax payable under section 7E.
Example – 2:
Ali owns one house in which he is residing with family worth Rs. 25 Million. He also owns a plot of 10 Marla in a housing society with fair market value of 15 Million. Ali also owns a farmhouse with fair market value of 18 Million.
Own House Not taxable
10 Marla Plot 15 Million
Farm House 18 Million
Total 33 Million
Taxable Income Rs. 1,650,000/- (5% of total fair market value – Rs. 33 Million)
Tax @ 20% Rs. 330,000/- (20% of Rs. 1,650,000/-)
(For Tax Rate refer rates specified in Division VIIIC of Part-I of the First Schedule on the income specified under section 7E (tax on deemed income) of the Income Tax Ordinance 2001)
Tax Payment
Finally note that under arrangements introduced vide Finance Bill 2023, this tax payment shall be ensured by Transfer Authority (Housing Society Office / Patwari Office) at the time of Sale/Purchase of property.
Anomaly
There is a major anomaly . . . in example-2, suppose Ali is going to Sale 10 Marla Plot situated in Karachi having fair market value of Rs. 15 Million which is below prescribed limit of Rs. 25M. How Housing Society / Patwari in Lahore would come to know that Ali also own a farmhouse in Sahiwal with fair market value of Rs. 18 Million as well? If Ali does not disclose farmhouse, Society/Patwari Office will not deduct any tax.
This tax has been thrown out by courts as pprty taxes fall under the purview of provincial taxation and not federal. Obviously there is some lack of or misunderstanding here …in time it will clear up
Pakistan say Zindabag who can ASAP
Section 7E:
1. Resident person has more than one property or properties, either plots, houses, agriculture land, farmhouses, flats etc. not used for business or agriculture purpose (there are certain exemptions available to self-resident house, land used for agriculture business, plots allotted to shaheed/govt. employees/armed servicemen, tax u/s 236K already paid in same tax year etc.)
2. Additional eligible properties have total/aggregate market value of Rs. 25 Million or more.
3. Income will be calculated as 5% of fair market value of the total value of properties.
4. Tax will be payable at the rate of 20% of the above calculated income.
Example – 1:
Ali owns one house in which he is residing with family worth Rs. 10 Million. He also owns a plot of 5 Marla in a housing society with fair market value of 5 Million. Ali also owns agriculture land in his village with fair market value of 10 Million.
Own House Not taxable
5 Marla Plot 5 Million
Agriculture land 10 Million
Total 15 Million
As aggregate value is less than 25 M, therefore, no tax payable under section 7E.
Example – 2:
Ali owns one house in which he is residing with family worth Rs. 25 Million. He also owns a plot of 10 Marla in a housing society with fair market value of 15 Million. Ali also owns a farmhouse with fair market value of 18 Million.
Own House Not taxable
10 Marla Plot 15 Million
Farm House 18 Million
Total 33 Million
Taxable Income Rs. 1,650,000/- (5% of total fair market value – Rs. 33 Million)
Tax @ 20% Rs. 330,000/- (20% of Rs. 1,650,000/-)
(For Tax Rate refer rates specified in Division VIIIC of Part-I of the First Schedule on the income specified under section 7E (tax on deemed income) of the Income Tax Ordinance 2001)
Tax Payment
Finally note that under arrangements introduced vide Finance Bill 2023, this tax payment shall be ensured by Transfer Authority (Housing Society Office / Patwari Office) at the time of Sale/Purchase of property.
Anomaly
There is a major anomaly . . . in example-2, suppose Ali is going to Sale 10 Marla Plot situated in Karachi having fair market value of Rs. 15 Million which is below prescribed limit of Rs. 25M. How Housing Society / Patwari in Lahore would come to know that Ali also own a farmhouse in Sahiwal with fair market value of Rs. 18 Million as well? If Ali does not disclose farmhouse, Society/Patwari Office will not deduct any tax.