SBP to Set Property Values. Buyers and Sellers to Suffer Massive Taxes

SBP to Set Property Values. Buyers and Sellers to Suffer Massive Taxes

SBP to Set Property Values. Buyers and Sellers to Suffer Massive Taxes

The Federal Board of Revenue (FBR) has said that the amendments introduced through Finance Act 2016 will require a builder, land developer, house owner or property dealer to pay a fix final tax based on the specific rate of city and its area, which will be set by SBP. The law is applicable on all projects approved after 1st July 2016 and on property acquired within the last 5 years.

The main changes in the amendment are listed below:

  • The Commissioner no longer has the power to value a property. The task will be handled by SBP approved panel of “valuers”. The binding nature of value determined by provincial revenue authorities for collecting stamp duty has also been revoked.
  • Section 15 says that income tax will be charged based on “gross income basis” instead of “net income basis” for individuals as well as Association of Persons (AOP) as a separate block of income tax.
  • Property rental receipts will now be charged under section 15A with no deductions of allowances allowed. Final discharge of tax liability will be based on Section 155 for individuals and AOPs.

All taxes will be based on the value of property prescribed by the District Collector. And no property can cost less than that. The new tax rates have been simplified and listed below:

  • For sellers, Withholding tax (WHT) on transfer of immovable property has been increased 1% for filers and 2% for non-filers. This tax is only applicable if the property was acquired within last 5 years.
  • For buyers, Withholding tax (WHT) on transfer of immovable property has been increased to 2% for filers and 4% for non-filers.
  • For land developers and sellers, capital gain tax will be applicable when disposing /selling an immovable property which was acquired within the past 5 years. Income will be taxed at 10%, double of what it used to be. Previously, people were charged 5% if the property was 1 year old and 10% if it was two years old and the rest was tax-free.
  • Withholding Tax (WHT) rates for rent payers and landlords have also been mentioned in Division VI and Division V respectively. The rates have been listed as tables in the document.
  • Income derived from property including rental income for individuals or Association of Persons (AOP) will not be taxed if it is lower than Rs. 200,000 and the filer has no other source of income.
  • Gains through the disposal of immovable property by a person in a tax year to a Rental REIT Scheme will be taxed at 5% up to 30thJune 2019.
  • Property income by companies will continue to be taxed at the existing rates and regulations.

Prior to this financial act, people and construction companies used to claim excessive expenses by declaring receipts which were somewhat suppressed. This has resulted in very little revenue in this sector up until now. By applying withholding tax, which is refundable if there is no payable income tax, the government will get another source of advance tax. Most people often don’t go through to have these taxes refunded and this means more for the government.

Another aspect of the amendment is that it could help curb the process of legalizing black money. Criminals used to buy property and show it as cheap. When it was sold, the price was misquoted higher than it was in reality and black money was distributed among the buyer and the seller.

However, there still remains the problem of the sale of property files. People who acquire property from different housing schemes can still sell their property, which is acquired on installments at higher rates and there is no mention of any amendment so far which can cater to this segment.

The new amendment could also help regularize property rates as a panel will decide the price of each city and its different areas. Property prices will become similar in each area of the city and overcharging or undercharging might be completely out of the question.


View Comments (1)

1 Comment

Leave a Reply

Your email address will not be published.

More in News

Miftah Ismail

Miftah Ismail discusses the debate around Shehbaz’s pay increase announcement

Muhammad UsmanApril 13, 2022
Zika virus

Researchers warn of a potentially catastrophic Zika virus spread

Muhammad UsmanApril 13, 2022
Greeniche Natural Health

Greeniche Natural Health, Leading Canadian Natural Healthcare Company to Launch its Brands in Pakistan

Muhammad UsmanFebruary 21, 2018
Justin Trudeau

Justin Trudeau In India With Family

Muhammad UsmanFebruary 20, 2018

“Awaami suo motu” of Axact Scandal Is Acing Out Its Rivals

Muhammad UsmanFebruary 20, 2018
Zainab Murder Case

Zainab Murder Case: ATC announces Four Death Sentences For Zainab’s Killer!

Muhammad UsmanFebruary 17, 2018

Childhood Super Hero Zakoota Jin Passes Away!

Muhammad UsmanFebruary 17, 2018
Peshawar Zalmi

Peshawar Zalmi Comes with #YellowStorm and People can’t Handle it!

Muhammad UsmanFebruary 14, 2018
Dr Anoosh Masood

SP Dr Anoosh Masood – Beauty with Brains!!

Muhammad UsmanFebruary 13, 2018