‘Deemed rental income’ of properties: LHC approached against legislation levying income tax

LAHORE: Former chairman of district council Narowal has approached the Lahore High Court against a recent legislation levying income tax on “deemed rental income” of properties.

The petitioner, Ahmad Iqbal Chaudhry, has argued that it is a property tax, which represents the single most important source of revenue of local governments all over the world.

He pleaded that although the tax levied under newly inserted section 7E of the Income Tax Ordinance, 2001 has been cleverly disguised by the Federal Board of Revenue (FBR) as an “income tax”, which is not a tax on income.

He said the new law mandated that every property which is not in the use of the owner, will be “deemed” by the FBR as a bearing a rent equivalent to 5 per cent of the total market value to the property.

In simple, every property owner would have to pay a tax equivalent to 1 per cent of the market value of his property to the federal government, he added.

This is the first time that the FBR has intruded into the domain of property taxes.

He argued that the federal government took the step only to gruel the revenues rightfully belong to local governments.

He therefore asked the court to set aside the law in question after declaring the impugned provision of the law as illegal and unconstitutional.

Copyright Business Recorder, 2022