FBR Announces Tax Exemption for Overseas Pakistanis and Certain Individuals on Property Sale

The Federal Board of Revenue (FBR) has announced that non-resident individuals including non-resident Pakistanis are not required to pay tax on immovable properties under section 7E of the Income Tax Ordinance 2001.

The FBR has relaxed many procedural conditions of section 7E through issuance of circular number 3 of 2023 issued on Tuesday.

The FBR has also relaxed the condition of obtaining exemption certificates from the Inland Revenue Commissioners in different cases, as specified in the said circular.

The FBR said that the explanatory Circular, which is being issued for facilitating the sale of property or transfer transactions, will be valid for an interim period till the development of an automated system for this purpose.

The FBR has further clarified that the conditions regarding obtaining a certificate from the Commissioner outlined in Circular No. 1 of 2023-24 will not apply with respect to the situations enumerated.

However, transferring authority of immovable property will maintain a proper record of the seller/transferor data along with relevant documents with respect to properties under sale/transfer covered under these specified situations.

The aforesaid record of data will be shared by the transferring authority with the concerned Chief Commissioner IR of the Regional Tax Office having jurisdiction over the seller/transfer on a weekly basis starting from the date of issuance of this circular.

Under the circular, the section 7E of the Ordinance does not apply to immoveable property owned by a local authority, development authority and builders and developers for land development and construction, subject to the condition that such persons are registered with the Directorate General of Designated Non-Financial Business and Professions (DNFBP).

The provisions of section 7E are not applicable on a property in the first year of acquisition on which tax under section 236K has duly been paid by the purchaser. In such a case the seller/transferor of the property will furnish to the transferring authority a Computerized Payment Receipt (CPR) having a unique CPR number, bearing the seller or transferor’s name, CNIC number and showing the tax paid under section 236K, date of payment as well as tax year.

The provisions of section 7E of the Income Tax Ordinance, 2001 is not attracted to an immoveable property allotted to Shaheed or dependents of a Shaheed belonging to Pakistan Armed Forces; a person who dies while in the service of the Pakistan Armed Forces or the Federal and Provincial Government; a war wounded person while in the service of the Pakistan armed forces or Federal or Provincial Government; an-ex-serviceman and serving personnel of armed forces or ex-employees or serving personnel of Federal and Provincial Government.

Therefore, where a seller or transferor belongs to aforesaid categories of persons, the condition of mode and manner of furnishing of evidence to the transferring authority notified through Circular No. I of 2023 will not apply to such categories of persons.

Board has received many representations as to the mode and manner of furnishing evidence regarding the application of section 7E of the Income Tax Ordinance, 2001 (the Ordinance) for the purpose of sale or transfer of immoveable property as envisaged in sub-section (2A) of section 236C of the Ordinance. In order to remove any difficulty arising for the implementation of the newly introduced sub-section (2A) and in partial modification and addendum to the instructions contained in Circular No.1 of 2023-24.

Moreover, FBR clarified that contents of the Circular will not apply in cases falling in the Jurisdiction of the Lahore High Court with reference to the Judgment in WP no. 52559 of 2022 dated 06-04-2023 unless the said judgment is reversed, suspended or vacated in a lntra Court Appeal or by the Supreme Court of Pakistan.

  • Great! Not unexpected at all. Continue making it as complicated and as ambiguous as possible, and then misuse this ambiguity to your advantage and to the disadvantage of the general public.

    It appears from the said language of the circular that this already divided society will continue to be divided further with more and more concessions to some (already advantaged) and continued suffering for those (already downtrodden). I fail to understand as to why first they make the rules in a haste and then issue amendments almost immediately.

    Dear Journalist! If you have understood the original law and then it’s amendments, please do summarise them in a language that can be understood by the man in the street like me.

  • The more complicated they make it, the better for intermediaries to make money. The more you expose yourselves, the more the chances to be looted or attacks on your bank accounts, or dacoits.

  • I agree to Adnan on some of the facts that most of the people know now. What I could extract is that the govt wishes to refill its empty treasury from $ and £ of the overseas i.e. land for sale. But, this seems flop as financiers invest in things for profit not for loss. The overseas Pakistani can see the misery and devastation of the people and that of the country. The people are fleeing to other countries to save their lives. How would they invest their money in any country where lawlessness and distrust prevail?

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