Section 7E of Income Tax Ord: IR Commissioners told to issue exemptions in 1-2 days: FBR chief

ISLAMABAD: Federal Board of Revenue (FBR) Chairman Amjad Zubair Tiwana Wednesday said the FBR has directed Commissioners Inland Revenue (IR) across Pakistan to issue exemptions in 1-2 days’ period under section 7E of the Income Tax Ordinance, 2001 till an automated system is fully in place.

The FBR chairman was responding to a query from Business Recorder at the Parliament House on practical issues being faced by the taxpayers seeking exemption certificates from the Commissioners IR.

The FBR chairman informed that the matter of the issuance of exemption certificate by the Commissioners IR would be resolved after the implementation of an automated system for taxpayers to obtain exemption or pay tax under section 7E of the Income Tax Ordinance, 2001. The FBR is devising a new IT system for the taxpayers to obtain an exemption without going to the commissioners.

"The IT system would generate a QR Code for the taxpayers which would be shown to the concerned registering/transferring authority without going to the commissioners in the field formations. In the meantime, the FBR has directed commissioners to promptly issue such exemptions in 1-2 days," the FBR chairman added.

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.

According to the sources, the FBR agreed that there are problems in the implementation and execution of the new scheme of section 7E of the Income Tax Ordinance, 2001.

In this connection, automated changes have been made in the IRIS system of the FBR by the Pakistan Revenue Automation Limited (PRAL).

Sources said that all taxpayers would be able to access 7E documents from their IRIS accounts and if any tax payments were due under the IRIS system, then they would pay tax or the system will automatically grant exemption in that particular case. Taxpayers can go to their relevant withholding agent, i.e., register of property if tax payment is due under the automated system.

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 per cent of the fair market value of the capital asset situated in Pakistan subject to exclusions of the capital assets provided in the law.

The deemed income is chargeable to tax at the rate of 20 per cent (effective rate one per cent of the fair market value of the immoveable property).

Copyright Business Recorder, 2023