FBR Issues Comprehensive Guidelines for Immovable Property Tax Payment

The Federal Board of Revenue (FBR) has released detailed guidelines for taxpayers to facilitate tax payments on immovable properties under section 7E of the Income Tax Ordinance 2001. These guidelines are available on FBR’s website to assist the general public.

The guidelines encompass both registered and unregistered users, offering step-by-step instructions on how to pay taxes on immovable properties. Under the ownership section, users are required to input specific details of the registering/transferring authority of immovable property, including province, district, complete address, town/tehsil, city/district, and total area.

Users are also prompted to declare whether the property is constructed or not, with options for “Yes” or “No.” If “Yes” is selected, the system prompts users to input the covered area.

In the case of “No,” users proceed to the next section, which entails declaring the property’s value and tax computation. Users must specify the property’s cost and fair market value, after which the system calculates the applicable tax.

Notably, FBR has already implemented the Lahore High Court’s (LHC) judgment regarding Section 7E (tax on deemed income basis) of the Income Tax Ordinance 2001. As a result, Section 7E no longer applies to cases within the LHC’s jurisdiction, regardless of filer or non-filer status.

Furthermore, FBR has eliminated the requirement for obtaining exemption certificates from the Commissioner of Inland Revenue for various taxpayer categories, including non-resident individuals, under Section 7E. This relaxation of procedural conditions has been outlined in Circular No. 3 of 2023.

To ensure smooth implementation of the newly-introduced sub-section (2A) and make addenda to Circular No. 1 of 2023-24, FBR has clarified that the circular’s contents do not apply to cases falling within the LHC’s jurisdiction unless the LHC’s judgment is overturned, suspended, or vacated through an intra-court appeal or by the Supreme Court of Pakistan.

FBR has also exempted non-resident individuals, including non-resident Pakistanis, from paying taxes on immovable properties under Section 7E of the Income Tax Ordinance 2001.

Additionally, the requirement to obtain exemption certificates from the Inland Revenue Commissioners in various cases has been relaxed, as specified in the circular.

The explanatory circular, issued to facilitate property sales and transfer transactions, will remain valid until an automated system for this purpose is developed, the FBR announced.

Moreover, the conditions outlined in Circular No. 1 of 2023-24 regarding obtaining a certificate from the Commissioner will not apply to the situations mentioned. However, the transferring authority of immovable property will maintain a comprehensive record of seller/transferor data and relevant documents for properties under sale/transfer within these specified situations.

This data will be regularly shared by the transferring authority with the concerned Chief Commissioner IR of the Regional Tax Office, starting from the circular’s issuance date.

The circular also clarifies that Section 7E of the Ordinance does not apply to immovable property owned by local authorities, development authorities, builders, and developers involved in land development and construction. This exemption is subject to their registration with the Directorate General of Designated Non-Financial Business and Professions (DNFBP).

Additionally, Section 7E provisions do not apply to properties acquired in the first year, provided that tax under section 236K has been duly paid by the purchaser.

In such cases, the seller/transferor must furnish a Computerized Payment Receipt (CPR) to the transferring authority, containing unique CPR information, the seller or transferor’s name, CNIC number, tax payment details under section 236K, date of payment, and tax year.

Furthermore, Section 7E of the Income Tax Ordinance 2001, does not apply to immovable properties allocated to Shaheed (martyrs) or their dependents, including those in the Pakistan Armed Forces, individuals who died in government service, war-wounded individuals in government service, ex-servicemen, serving personnel of armed forces, ex-employees, or serving personnel of the federal and provincial government. For individuals belonging to these categories, the conditions specified in Circular No. 1 of 2023 for furnishing evidence to the transferring authority do not apply.