Karachi: The Federal Board of Revenue (FBR) has introduced a new verification form for the real estate sector under the new Section 7E of the Income Tax Ordinance, 2001, to regularise immovable property transactions, according to news published on August 15.
This recently introduced verification form is now obligatory for immovable property sellers. Its purpose is to ensure that property transactions adhere to the FBR’s tax regulations, promoting transparency and tax compliance within the real estate sector. According to the provisions of Section 236C (2A), sellers of immovable property are required to complete this form and submit it to the registering authority prior to the property’s transfer.
The form contains crucial information about the property, the seller, and associated tax implications. It includes the seller’s name, address, tax number, and property specifics such as type, location, and value. The seller is obligated to declare the property’s value (according to the fair market value stated in the income tax return) and the tax paid under Section 7E. The Commissioner of Inland Revenue verifies adherence to the rules or examines if exemptions are applicable.
Under Section 236C of the Income Tax Ordinance 2001, the entity responsible for registering, recording, or attesting the transfer of immovable properties is termed the ‘transferring authority’. This authority is entrusted with collecting advance adjustable income tax from the seller or transferor. For individuals listed as Active Taxpayers (ATL), the tax rate for this collection stands at 3% of the received consideration. However, if the seller or transferor is not on the ATL, the tax rate increases to 6%.
Introduced through the Finance Act 2022, Section 7E treats resident individuals as deriving an income equivalent to 5% of their property’s fair market value in Pakistan, with certain exceptions. The tax rate for this presumed income is set at 20%, effectively amounting to 1% of the property’s fair market value.
In line with the Finance Act 2023, a new sub-section (2A) has been appended to Section 236C of the Ordinance. This provision prohibits the registering, recording, or attesting of immovable property transfers unless the seller fulfils their tax obligation under Section 7E. Evidence of this compliance must be furnished to the transferring authority as specified. This amendment aims to ensure property transactions conform to FBR’s tax regulations, bolstering transparency and tax compliance within the real estate sector.
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.
