Islamabad: The Federal Board of Revenue (FBR) is considering some new taxes on real estate.
Under the Finance Bill 2023, the government has proposed eight amendments to the immovable property tax, having a revenue impact of over Rs 150 billion.
The first proposal is to include short-term gains in taxable income and tax long-term gains at a rate of 20 percent, along with cost indexation. The second suggestion is to abolish the concessional regime by amending Section 37 of the Income Tax Ordinance 2001.
The third plan is to omit Section 7E of the income tax ordinance and amend Sections 15 (income from property) and 39 (income from other sources) of the Income Tax Ordinance, 2001, to introduce deemed rental income and deemed ground rent at a rate of five percent. One self-occupied house and one empty residential plot, not exceeding 500 square yards, are exempt. This proposal is not valid for industrial and agricultural land either.
The fourth idea is to extend the scope of sections 236 C, which deals with advance tax on the sale or transfer of immovable property, and 236 K, which refers to advance tax on the purchase or transfer of immovable property.
The fifth proposal is to revise the advance tax on the sale or transfer of immovable property under Section 236 C of the ordinance. An increase of seven percent has been suggested for non-fliers.
For non-filers, receiving gifts from non-relatives will also be taxed. Developers and builders will be taxed on a per square-foot basis during the construction period. Another suggestion is to empower FBR to notify the minimum fair market value (FMV) for construction purposes.
These suggestions are still under consideration and waiting for government approval. It is pertinent to mention that the Lahore High Court (LHC) has recently ruled that the federal government cannot tax immovable property as income has yet to come out.
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