ISLAMABAD: The Federal Board of Revenue (FBR) is considering some major taxation proposals to document transactions of non-filers in the real estate sector and effectively tax immovable properties through the Finance Bill 2023.

Sources told Business Recorder here on Tuesday that the Finance Bill 2023 is expected to introduce major amendments to the Income Tax Ordinance 2001 to implement the budgetary measures relating to the immovable properties from July 1, 2023.

In this connection, the FBR is seriously examining these new budget proposals for the next fiscal year. However, the final decision has yet to be taken by the government.

RRMC recommendation: Section 7E of IT Ord should be equally applicable to non-filers

The FBR has received the following major budget proposals relating to the immovable properties having a revenue impact of over Rs150 billion.

First, section 37 (capital gains) of the Income Tax Ordinance 2001 has been proposed to be amended in order to do away with the concessional regime.

Second, short-term gain be included in taxable income and the long-term gain be taxed at the rate of 20 per cent along with cost indexation (CPI/Deflator based).

Third, section 7E (tax on deemed income) of the Income Tax Ordinance be omitted and instead, section 15 (income from property) and 39 (income from other sources) of the Income Tax Ordinance, 2001 be amended to introduce the concept of deemed rental income and deemed ground rent at the rate of five per cent of FMV (exemption of one-self occupied house and one empty residential plot not exceeding 500 sq yard- industrial, agriculture exemption).

Fourth, the scope of section 236 C (Advance Tax on sale or transfer of immovable Property) and 236 K (advance tax on purchase or transfer of immovable property) be extended to rights to acquire immoveable property (files) and property acquired on an installment basis.

Fifth, the rate of tax under section 236 C be increased to seven percent in case of non-filer.

Sixth, income tax to be imposed on receipt of gifts from non-relatives (whether received through cross cheque or otherwise).

Seventh, the FBR may be empowered to notify minimum Fair Market Value (FMV) for construction purposes.

Eight, the minimum tax has been proposed on developers and builders during development/construction on per sq ft basis.

Copyright Business Recorder, 2023