ISLAMABAD The federal government has imposed Income Tax (Amendment) Act 2016 across the country, allowing the buyer to clean up their huge undeclared transaction amount and buy an illegal plot by paying three per cent tax to Federal Board of Revenue (FBR).
The amendment to the income tax law was approved by the National Assembly last week amid boycott of the session by the opposition parties. “The bill is acceptable to all stakeholders, including real estate agents, builders and developers and even the tax collection body,” Qaiser Ahmed Sheikh, chairman of the National Assembly’s Standing Committee on Finance, had told the lower house.
According to the bill, the formula for computing the amount is ‘A-B’, where ‘A’ is the value of the immovable property determined by the valuators of the FBR, and ‘B’ is the value recorded by the authority registering or attesting the transfer, which is the deputy commissioner’s office.
However, this formula will be applicable only if the value A is higher.
The buyer of the property will have to pay three per cent of the difference between the A and B, and the FBR will not ask about the source of their income.
The government will also benefit as the buyer will become a filer. The FBR will get three per cent tax from realty sector.
The amendment removes a gap between the basic rates at which most of the registries are signed at the deputy commissioner’s office (called DC rates) and the valuation by the Federal Board of Revenue (FBR) determining the price of the property.
On the filer investor, two per cent has been imposed by the government while the Non-filer investor will have to pay to four per cent tax on purchasing or selling any property.
A capital gain of five per cent has been imposed on the sale of immovable property within three years; however there will be no capital gain tax after three years.
Legal heirs of the martyrs of armed forces, levies force, and police are exempted from withholding tax.