KARACHI: The Federal Board of Revenue (FBR) has taken a significant step toward improving property transactions by introducing a new verification form under Section 7E of the Income Tax Ordinance, 2001.
This newly unveiled form is now a mandatory requirement for individuals selling immovable property, aiming to streamline the tax process and boost transparency in property dealings.
Under the provisions of Section 236C (2A), the recently introduced verification form necessitates property sellers to furnish this document to the registering authority before any transfer of immovable property.
The form encompasses vital details related to the property, the seller, and the tax implications associated with the transaction.
Moreover, crucial information is included in the form, consisting of the seller or transferor’s name, address, National Tax Number (NTN), or Computerized National Identity Card (CNIC).
Additionally, it also entails specifics about the property, encompassing its nature (plot, flat, or constructed premises), location, province, district, and tehsil or town.
Furthermore, the form requires the seller to declare the amount chargeable under Section 7E, the fair market value of the property as indicated in their income tax return, and the tax paid under Section 7E for the specific property.
The Commissioner of Inland Revenue will then determine whether the taxpayer has adhered to the provisions of Section 7E for the relevant tax year or if they are exempt from this requirement.
Besides, the Income Tax Ordinance 2001’s Section 236C designates the entity responsible for registering, recording, or attesting the transfer of any immovable property as the “transferring authority.”
This authority is now entrusted with collecting advance adjustable income tax from the seller or transferor.
For individuals on the Active Taxpayers’ List (ATL), the tax rate for this collection stands at 3% of the gross consideration received.
However, if the seller or transferor is not on the ATL, the tax rate increases to 6%.
The introduction of Section 7E through the Finance Act 2022 aimed to treat every resident person as having derived income equivalent to 5% of the fair market value of the capital asset located in Pakistan, with some exceptions.
The tax rate for this deemed income is set at 20%, effectively amounting to 1% of the fair market value of the immovable property.
In alignment with the Finance Act 2023, a new sub-section (2A) has been incorporated into Section 236C of the Ordinance.
This clause bars the transferring authority from registering, recording, or attesting the transfer of any immovable property unless the seller or transferor has fulfilled their tax obligation under Section 7E.
In addition, the evidence of this compliance must be provided to the transferring authority in the prescribed mode, form, and manner.
This amendment aims to ensure that property transactions adhere to the FBR’s tax regulations, promoting transparency and tax compliance within the real estate sector.
Source: PK Revenue
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I humbly would like to state Fbr has taken a strong hand on transactions .already the law has very strict I feel the public is fleeing from pakistan we need awareness to comply with all the clauses .unfortunately we are not always dealing with educated people 70% are illletrate we have to go slowly I am fearing a complete dead lock in the builders largely uneducated they will bribe or have to hire expensive tax lawyer being a lawyer I would sincerely advise restraint for 75 years there was no no law. Yu have to explain to imf that such strict monitoring will not fare well with the builder class rich and uneducated
maybe this will bring some sense into current prices where even studo flats cost crore plus
This act will further dampen the investment climate in the country besides opening multiple vistas and windows for corruption to the detriment of already ailing economy on the verge of collapse
Becuase of the rise in taxation the property dealing is worstly declined and some investers are flying towards other countries for investment. Yesterday I meet a person who is selling all property and moving towards other country. in past years during IK regim the property taxation was relexed thats why most of the money was invested in real estate and money circulation was at its peak. Unfortunatly, now a days every person has kept his money with him and no investment is reported.
no man state… please do not stop the real estate transactions, either it is beneficial to state toooo..
They want the country to sink deeper into crisis. Taxing those who are already taxed heavily will definitely encourage disinvestment & flight of capital. Deemed income is the most stupid tax imposed. This was done by Mifta who is an industrialit & deadly against property investment. He doesn’t realise that all economies & specially developing economies of the world are dependent on property investments in the country as they run 50 industries.
A very balanced approach is required from all the governments( present and future) in Pakistan. We can’t improve the economy only by taxing Realstate, construction industry has worsened and poor labors lost their bread n butter. But I don’t agree erecting concrete with expensive finishes but no one living there. Study developing economies of the world and adopt technological approach like making some software model suited for Pakistan