‘Tax on Deemed Income basis’ on immovable properties: Exemption only for persons appearing on Active Taxpayers’ List

ISLAMABAD: The exemption from payment of “Tax on Deemed Income basis” on immovable properties would only be applicable on persons appearing in the Active Taxpayers’ List under the Finance Act 2023.

Explaining an important amendment in Finance Bill 2023, a leading tax expert said that the tax which was levied in Finance Act, 2022 is on the value of immovable capital assets especially plot and houses. This is a sort of pseudo wealth tax on the immovable property at a deemed valuation. This tax has been challenged before the superior courts and the ultimate decision is pending before the Supreme Court.

Two major changes have been proposed in the amendments proposed. Firstly the exemption from this tax as prescribed under subsection (2) shall be applicable only if the person appears in Active Taxpayers’ List.

New condition imposed on sellers of properties

Second amendment which has been placed under Section 236C of the Ordinance whereby a condition has been prescribed that no transfer of immovable property will be registered unless it is ensured that liability under Section 7E has been discharged. This is a very appropriate prescription.

The second amendment is very important in the sense that a lot of properties are held by the person who do not appear in the active taxpayers list or are eligible to exemptions provided in the law.

The condition that there will be no transfer without discharging this liability is a good step. It is; however, strongly suggested that this provision be used to broaden the tax base and any person who pays tax under this section be necessarily required to file the income tax return.

Procedures are required to be prescribed to ensure discharge of tax liability under Section 7E of the Ordinance. An automated coordination between the property registration and tax authorities can be designed for this purpose, the tax expert added.

Copyright Business Recorder, 2023