Recent reports state that the Federal Board of Revenue (FBR) intends to penalize cash payments made in real estate transactions. The officials state that the goal of this action is to increase tax revenue from this industry. This news was published in the newspapers and on FBR’s official website. The widespread use of cash transactions for real estate purchases, which affects tax collection, was also highlighted by FBR officials.
The Federal Board of Revenue recently declared that the real estate industry would face severe fines. The institution is taking the required actions to halt cash transactions for larger properties, according to an official. Additionally, a dedicated monitoring cell has been set up that will look out for this matter.
A tax section known as 75A was previously added by FBR to the Income Tax Ordinance of 2001. This amendment prohibited the general public from making cash purchases of real estate assets with fair market values between PKR 5,000,000 and PKR 1,000,000. Rather, purchasers were required to utilize any type of bank receipt-based transaction, including demand drafts, pay orders, crossed checks, and other similar transactions.
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Moreover, FBR will ascertain the fair market value in compliance with subsection 4 of section 68. Moreover, the province’s stamp duty authority may also establish the value. The higher of the two values will be regarded as the real estate’s fair market price.
Additionally, the FBR officials declared that there would be harsh penalties and repercussions for those who disobey the aforementioned rules. A 5% penalty of the entire asset value will be imposed on those who use cash transactions to purchase properties worth more than $5,000,000, subjecting them to severe fines.
It is crucial to note that in order to avoid fines and penalties, investors and property purchasers must adhere to the new rules and make purchases in accordance with the guidelines set forth by FBR.
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