ISLAMABAD: Gifts including jewelry/gold received/purchased by politicians from Toshakhana should be charged to income tax on deemed income basis like tax imposed on deemed property income, wef, Tax Year 2022, leading tax experts have proposed tax on Toshakhana gifts without any discrimination.
Lahore-based tax lawyer Waheed Shahzad Butt told Business Recorder that the concept of deemed income was introduced through the Finance Act, 2022, which is applicable for tax year 2022 and onwards for taxation of capital assets situated in Pakistan. The tax was imposed on immovable properties on deemed income basis under section 7E of the Income Tax Ordinance, 2001.
A resident person shall be treated to have derived, as income chargeable to tax under this section, an amount equal to five percent of the fair market value of capital assets situated in Pakistan held on the last day of the tax year excluding certain categories.
They added that some taxpayers had questioned the constitutionality of Section 7E, on the premise of legislative incompetence of the Parliament to enact law outside the scope of Entry 50 of the Federal Legislative List, Fourth Schedule of the 1973 Constitution.
However, the Sindh High Court (SHC) has dismissed petitions filed against the imposition of tax on immovable properties on “deemed income basis” under section 7E of the Income Tax Ordinance, 2001.
The concept of deemed income was related to the immovable properties and not extended to the immovable properties under the Finance Act 2022. The proposal to tax the gifts including jewelry received/purchased from “Toshakhana” on deemed income basis would result in documentation, increase in revenue collection and the sources of purchase of gifts from the “Toshakhana”.
The purchasers of such highly expensive gifts should not be exempted from the tax and must be taxed on the basis of deemed income for the purpose of taxation under the Income Tax Ordinance, 2001.
Copyright Business Recorder, 2023