In a significant development, the Federal Board of Revenue (FBR) has provisionally suspended a major increase proposed in the valuation of immovable properties till September 2023. The board will issue an automated system for taxpayers to obtain exemption or pay tax under section 7E of the Income Tax Ordinance, 2001.
The FBR has also decided to introduce an online facility for all citizens in the “IRIS” updated system to grant exemption or pay one percent tax under section 7E on immovable properties without going to the Commissioner Inland Revenue (FBR). “The FBR’s IRIS Portal would end the discretion of Commissioners Inland Revenue in deciding the matters of section 7E”, sources said.
A day-long meeting was held between FBR Chairman Amjad Zubair Tiwana and his team of tax officials in the real estate sector at the FBR Headquarters on the 5th of Aug 2023.
It has been agreed between the FBR and the real estate sector that the FBR for the time being will not issue enhanced values of immovable properties in August 2023. The FBR was in the process of issuing new values during the current month.
Under Finance Act, 2022 section 7E was introduced whereby, for tax year 2022 and onwards, every resident person has been treated to have derived as income, an amount equal to five percent of the fair market value of the capital asset situated in Pakistan subject to exclusions of the capital assets provided in the law.
The said deemed income is chargeable to tax at the rate of 20 percent (effective rate one percent of the fair market value of the immovable property).
The Finance Act, of 2023, has introduced a new sub-section (2A) in section 236C of the Ordinance which places a bar on the transferring authority for registering, recording, or attesting transfer of any immovable property unless the seller or transferor has discharged his tax liability under section 7E of the Ordinance and evidence to this effect has been furnished to the transferring authority in the prescribed mode, form and manner.