Karachi: The Federal Board of Revenue (FBR) has reportedly introduced a new verification form to formalize immovable property transactions under the new Section 7E of the Income Tax Ordinance, 2001, according to news reports that were published on August 15th. The goal of the resolution is to guarantee that property transactions follow FBR’s tax standards. Additionally, it encourages openness and tax compliance in the real estate industry. If exemptions are required or if the rules are being followed, the Commissioner of Inland Revenue makes that determination.
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Important details including the seller’s name, address, tax identification number, and details about the property like kind, value, and location are all included in the most recent verification form. Sellers are now required to indicate the property’s value on this newly introduced form (in accordance with the fair market value declared in the income tax return). Before the property is transferred, the sellers must deliver the completed form to the registering authorities.
Section 236C of the Income Tax Ordinance of 2001 defines “transferring authority” as the entity in charge of registering, attesting, or recording the transfer of immovable properties. It is commendable that this authority was able to convince the transferor or seller to pay the advance adjusted income tax. For individuals who are on the Active Taxpayers List (ATL), the tax rate for this collection is fixed at 3% of the received consideration; however, if the transferor or seller is not on the ATL, the rate increases to 6%.
Read More: FBR Increases Property Tax Rate In Punjab
With limited exceptions, Section 7E of the Finance Act 2022 treats citizens of Pakistan as having an annual income equal to 5% of their home’s fair market value. Taxes on the estimated income are calculated at a rate of 20%, or 1% of the asset’s fair market value. In compliance with the Finance Act of 2023, a new sub-section (2A) has been introduced to Section 236C of the Ordinance.
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