The Federal Board of Revenue (FBR) will not charge tax on agricultural property excluding farmhouses under section 7E of the Income Tax Ordinance 2001.
Through circular number 3 of 2023, the FBR has explained the applicability of section 7E on farmhouses. Excluding the farmhouses and the land annexed thereto constructed on agricultural land, self-owned agriculture property where agriculture activities are carried out by a person do not attract the provision of section 7E of the Ordinance.
Therefore, where immovable property under sale or transfer is agriculture property excluding farmhouse(s), as evidenced through the property documents, the transferring authority, with respect to that agriculture property under sale or transfer, will execute the transfer without seeking from the seller or transferor evidence of payment of tax u/s 7E or the Form-A attached to Circular No. 01 of 2023 -24.
However, where one or more than one farmhouse has been constructed on an agriculture property, then the conditions outlined in Circular No.1 of 2023-24 will mutatis mutandis (once the necessary changes have been made) apply on such farmhouse(s), FBR added.
A farmhouse house has been defined as “a house constructed on a total minimum area of 2,000 square yards with a minimum covered area of 5,000 square feet used as a single dwelling unit with or without an annex: Provided that where there are more than one dwelling units in a compound and the average area of the compound is more than 2,000 square yards for a dwelling unit, each one of such dwelling units shall be treated as a separate farmhouse”, FBR added.
Property of disable person should be exempted from tax on sale or purchase