Islamabad: According to the most recent information, the Federal Board of Revenue (FBR) indicated that as cash is frequently used for transactions in the real estate sector, it is important to keep track of it. The top FBR official explained that this is why we have decided to penalize cash real estate transactions in order to regulate and improve tax collection. Widespread non-compliance with these standards has been observed in the real estate sector as a result of ignorance or the involvement of unregistered or under-informed property dealers.
The Income Tax Ordinance of 2001 was amended in 2019 with the introduction of Section 75A. The amendment forbids anyone from using cash transactions to buy a moveable property with a fair market value greater than Rs. 5,000,000 or any other asset worth more than Rs. 1,000,000. The provincial authority or board of the city will choose the property’s rate.
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It is important to note that certain banking instruments must be utilized to verify genuine funds transfers between bank accounts, such as crossed bank checks, crossed demand drafts, crossed pay orders, or other crossed banking instruments.
The people involved in such transactions will not be eligible to claim deductions related to depreciation, initial allowance, intangibles, and pre-commencement expenditure for assets acquired outside of the specified banking channels, which will have serious repercussions for those who do not adhere to or agree with these banking methods.
Despite these penalties, people who purchase real estate property worth more than 5 million rupees using cash or a bearer check will be subject to a fifth penalty on the property’s value. This is in accordance with Section 76’s requirements, which state that any cash amount used for a purchase conducted via prescribed banking channels will not be considered as a cost when calculating gains from selling such an asset.
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