ISLAMABAD: In a major development, the Federal Board of Revenue (FBR) has temporarily suspended a major increase proposed in the valuation of immovable properties till September 2023. The board will issue an automated system for taxpayers to obtain exemption or pay tax under section 7E of the Income Tax Ordinance, 2001.
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.
A day-long meeting was held between FBR Chairman Amjad Zubair Tiwana and his team of tax officials with the real estate sector at the FBR Headquarters on Saturday.
It has been agreed between the FBR and the real estate sector that the FBR for the time being will not issue enhanced values of immovable properties in August 2023. The FBR was in the process of issuing new values during the current month.
NA panel told: Property transfers, registration halted due to Section 7E ITO
Now, the committees will be constituted in each city to work out the new values in consultation with the respective associations of the real estate sector. The next date of the meeting would be September 2023 to finalise 10 per cent uniform increase in values of the immovable properties with a resolution of the anomalies.
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. The FBR officials assured the sector that the powers of section 7E would not be misused by the Commissioner of Inland Revenue for the grant of exemption.
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 due under the IRIS system, then they would pay tax or system will automatically grant exemption in that particular case. Taxpayers can go to their relevant withholding agent, ie, register of property, if tax payment is due under the automated system.
When contacted, real estate expert Muhammad Ahsan Malik told Business Recorder that the updated software of the FBR would be available to the taxpayers pertaining to the section 7E by end of August 2023.
He stated that the refund of withholding tax payable on buying and selling of properties is a major issue. If we file an application under section 170 of the Income Tax Ordinance for refund, the audit has been started against each applicant. The FBR should see this matter of selecting each case for audit where refund application has been filed under section 170 of the Income Tax Ordinance.
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 said deemed income is chargeable to tax at the rate of 20 per cent (effective rate one per cent of fair market value of immoveable property).
The Finance Act, 2023, has introduced a new sub-section (2A) in section 236C of the Ordinance which places a bar on the transferring authority for registering, recording or attesting transfer of any immovable property unless the seller or transferor has discharged his tax liability under section 7E of the Ordinance and evidence to this effect has been furnished to the transferring authority in the prescribed mode, form and manner, Ahsan Malik added.
Copyright Business Recorder, 2023