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Yesterday, Lahore High Court abolished payment of 1% annual tax on real estate.
The Federal Board of Revenue (FBR) has announced that non-resident individuals including non-resident Pakistanis are not required to pay tax on immovable properties under section 7E of the Income Tax Ordinance 2001.
The Federal Board of Revenue (FBR) has implemented the judgment of the Lahore High Court (LHC) on Section 7E (tax on deemed income basis) of the Income Tax Ordinance 2001 and now Section 7E will not apply to cases (filers/non-filers) falling within the jurisdiction of the LHC.
FBR has issued a notification that property transfers can happen without clearing liability of 1% rental tax of previous years.
Non-resident Pakistanis are not required to pay tax under section 7E.
Provisions of sections 7E of the Income Tax Ordinance, 2001 is not attracted to an immoveable property allotted to –
- Shaheed or dependents of a Shaheed belonging to Pakistan Armed Forces;
- A person who dies while in the service of the Pakistan Armed Forces or the Federal and Provincial Government.
- A war wounded person while in the service of the Pakistan armed forces or Federal or Provincial Government:
- An-ex-serviceman and serving personnel of armed forces or ex-employee or serving personnel of Federal and Provincial Government
The FBR has also relaxed the condition of obtaining exemption certificates from the Inland Revenue Commissioners in different cases, as specified in the said circular.
However, transferring authority of immovable property will maintain a proper record of the seller/transferor data along with relevant documents with respect to properties under sale/transfer covered under these specified situations.
The aforesaid record of data will be shared by the transferring authority with the concerned Chief Commissioner IR of the Regional Tax Office having jurisdiction over the seller/transfer on a weekly basis starting from the date of issuance of this circular.
Under the circular, the section 7E of the Ordinance does not apply to immoveable property owned by a local authority, development authority and builders and developers for land development and construction, subject to the condition that such persons are registered with the Directorate General of Designated Non-Financial Business and Professions (DNFBP).
The provisions of section 7E are not applicable on a property in the first year of acquisition on which tax under section 236K has duly been paid by the purchaser. In such a case the seller/transferor of the property will furnish to the transferring authority a Computerized Payment Receipt (CPR) having a unique CPR number, bearing the seller or transferor’s name, CNIC number and showing the tax paid under section 236K, date of payment as well as tax year.
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