Islamabad: Reforms and Resource Mobilization Commission of Pakistan (RRMC) Chairman Ashfaq Tola has suggested that the Federal Board of Revenue (FBR) should incorporate an option in its ‘IRIS’ system for taxpayers in the online declaration form to address the tax on immovable properties under section 7E of the Income Tax Ordinance, 2001 (ITO), according to news sources on July 24.
Section 7E of the Income Tax Ordinance was introduced via the Finance Act 2022, imposing a 20% tax on the amount equivalent to 5% of the fair market value of immovable properties held by resident individuals, with fair market values exceeding PKR 25 million. This imposition applies retrospectively from the tax year 2022 and onwards, and several taxpayers challenged its validity, leading to multiple cases being filed in provincial High Courts. The Supreme Court of Pakistan has granted a leave to appeal to the appellant taxpayers against the Sindh High Court’s (SHC) Order and issued a stay order in favor of the appellants, provided they deposit 50% of the tax demand.
Recently, the Finance Act 2023 (Act 23) introduced an amendment, sub-section (2A) in Section 236C, making it mandatory to provide evidence of payment of deemed income tax liability on any immovable property before its sale or transfer. However, the Act did not specify the rules and modes for payment, which were later addressed in Circular No. 01 of 2023-24, issued by the FBR on July 21, 2023.
To facilitate the process, it is proposed that the FBR integrates the properties exempted under section 7E and the effect of the stay order in the taxpayers’ online tax particulars. This data can then be shared with the entity responsible for registering immovable properties, enabling more efficient compliance with section 236C (2A).
Given the stay order granted by the apex court, taxpayers who have declared property under section 7E on IRIS should have the option to upload a certified copy of the stay order for the applicable tax year in their online declaration. This step would create a digital database of taxpayers benefiting from the stay order.
Ashfaq Tola also suggested transitioning the process of obtaining the certificate online through IRIS, which would leave a digital trail of the documents and streamline the integration of exempted properties and stay orders in the tax particulars, assisting the entity responsible for registering immovable properties in ensuring compliance with section 236C (2A) more efficiently.
Hazafa reveres the art of writing and has been turned into a property enthusiast by profession. Her daily survival kit includes; tea, coffee, keyboard and paperbacks.
