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ISLAMABAD: The Federal Board of Revenue (FBR) on Friday issued detailed guidelines for taxpayers to pay tax on immovable properties under section 7E of the Income Tax Ordinance, 2001.

The guidelines have been placed on the FBR website for the facilitation of the general public.

The FBR has issued guidelines for both registered and unregistered users.

FBR de-attaches bank accounts of PIA

The FBR has guided the taxpayers on how a taxpayer can pay the tax on immovable property.

Under the owner portion of the IRIS page, the user must enter the particulars of Registering/Transferring Authority of Immovable Property i.e. province, District; Complete Address; Town/Tehsil; City/ District and total area.

A question will be asked whether the property is constructed or not. User will have two options i.e., yes/no.

In case the user selects the yes radio button, then the system will ask the user to enter the covered area. In case of “no”, the user will move on to the next area. The next area will be the value of property and tax computation. The user will declare the cost of the property and fair market value, and the system will calculate the tax on the said property.

The FBR has already 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.

The FBR had abolished the condition of obtaining exemption certificates from the Commissioner Inland Revenue from different categories of taxpayers including non-resident persons under Section 7E of the Income Tax Ordinance, 2001.

The FBR has relaxed many procedural conditions of section 7E through the issuance of circular number 3 of 2023.

The FBR has also 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 FBR has also relaxed the condition of obtaining exemption certificates from the Inland Revenue Commissioners in different cases as specified in the said circular.

The FBR said that the explanatory circular, which is being issued for facilitating the sale of property or transfer transactions, will be valid for an interim period till the development of an automated system for this purpose.

The FBR has further clarified that the conditions regarding obtaining a certificate from the commissioner outlined in Circular No 1 of 2023-24 will not apply with respect to the situations enumerated. 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.

Section 7E of the Ordinance does not apply to immoveable property owned by a local authority, a 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 a property will furnish to the transferring authority a computerised 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.

The provisions of Section 7E of the Income Tax Ordinance, 2001 are 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-employees or serving personnel of federal and provincial government.

Therefore, where a seller or transferor belongs to aforesaid categories of persons, the condition of mode and manner of furnishing of evidence to the transferring authority notified through Circular No 1 of 2023 will not apply to such categories of persons.

Copyright Business Recorder, 2023


Comments are closed.

Kamran Rauf Sep 16, 2023 07:57am
Section 7 E has destroyed the property business and caused massive losses of revenue.
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Jawed Sep 16, 2023 09:28am
Discrimination in tax statutes are not enforceable. It is not possible under Federal tax jurisdiction that law will be implemented in one area and not in others, unless tax free zones.
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Ahsan ali Sep 16, 2023 02:36pm
Does the section 7E is applicable on booking of appartments and plots ??
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Hilarious Sep 16, 2023 04:44pm
@Kamran Rauf , to whom? Speculators? Low real estate prices are a good thing for actual buyers and the masses in general, but bad for speculators (or as they like to refer to themselves as “investors” in Pakistan). There is no need for people to be hoarding multiple properties in the country where a majority can only dream about owning a house, especially when stupendously low book values come into play. This is one step that actually benefits genuine buyers. Also, you talk about lost revenue, more revenue was being lost when properties having values of 100 million have book values of 6 or 7 million and were being transferred for those amounts.
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faisal Sep 16, 2023 05:51pm
Too much speculation in propety while majority of young people can't afford house. A big shakeup is coming.
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Javed Sep 16, 2023 06:14pm
Just as we have destroyed our tourism potential by harassing foreigners, we are now going to destroy the real estate sector resulting in less tax revenues, small investors had put their savings in land as a hedge against inflation but enhanced powers to the FBR will only cause distress to ordinary citizens, in fact if the government was to send FBR on long leave and allow the private sector to enhance tax revenues it will be a win win situation for all
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Asif Sep 16, 2023 08:56pm
There is talk in USA that housing is cooling off. Real estate sector will see reversal in USA . Real demand is drying and mostly commercial is effected. Airbnb is banned in most areas and also many house owners who use to earn through renting property using Airbnb are now unable to pay loan on their property. Many in coming months will return key to bank as they won't be able to retain such property and in USA the loan period is 30 or 50 years for housing.
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Ammar Khan Sep 16, 2023 09:33pm
@Jawed, section 7e is for seller
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Majida Burhan Sep 16, 2023 09:39pm
Government & FBR are bent upon destroying any business that is doing well.
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Saleem Sep 17, 2023 01:25pm
Non state sector recommendation of such law which fixed everyone. A simple revenue could be earned by fixing some affordable charges according to plot size while selling the immovable properties. We r living in fool paradise.
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Asif Jamal Sep 17, 2023 04:55pm
When a person having NTN number and paying yearly income tax regularly on his wealth so why FBR imposed such type of foolish tax u/s 7-e as deemed income!!!
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Tariq Qurashi Sep 18, 2023 01:47pm
The only place people could park their money to protect themselves against inflation was a plot. There are at present no viable alternatives for investment in Pakistan after the advent of "7E". If the purpose was to force people to invest in productive assets like the stock market or industry, then this is just not going to work. The red-tape, rent seeking, and taxation rules do not encourage people to start new industries or businesses. This is why the volume of unregistered SMEs is increasing, because if you register, then your business is likely to become unviable. New simplified rules and taxes need to be introduces for SME's to encourage them to register. The stock market is manipulated, and is also not a viable place to invest. In fact the size of the Pakistani stock market is miniscule. The government desperately needs to develop some new investment instruments that give people a real return; otherwise people will continue to buy dollars and keep them in socks under their bed.
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