The Income Tax Amendment Act 2016 has been signed by President Mamnoon Hussain. With this, the real estate tax amnesty scheme has gotten legal cover. Experts hope that the scheme will drag the real estate market out of the standstill it has been facing for over 5 months.
It is generally believed that pressure exerted by the business community, protests held by real estate agents and the influence of big investors together forced the government to announce this amnesty scheme. This could be partly true, but I believe that a stark drop in the revenue collected from the property sector has played a bigger role in this regard.
Reportedly, the Federal Board of Revenue (FBR) is currently facing a shortfall of PKR 100 billion in its budgeted tax revenue. A major chunk of this revenue is collected from the real estate sector, which has seen a drop of over 80% in transaction volume since July 2016. Furthermore, the new tax collection mechanism invoked a potentially harmful situation for the construction sector, affecting projects worth PKR 100 billion. Now that the amnesty scheme has been approved, the FBR hopes to collect PKR 50 billion in terms of tax revenue from the property sector.
Those interested in availing the amnesty scheme would be required to pay 3% tax on the difference between the DC rate and the rates notified by the FBR in its valuation tables. Reportedly, the new bill will be applicable for the properties purchased before July 2016. A tax official told reporters that the government would consider whether the scheme should continue, in the next budget.
Those looking to avail this scheme will not be probed about the source of money they invested in the property sector.
The Income Tax Amendment Act 2016 has exempted the families of martyred army, rangers and police officers from Capital Gains Tax and Withholding Tax on the sale of property inherited by or awarded to them. Furthermore, property worth PKR 4 million or less will also be exempted from Withholding Tax.
Feel free to give your feedback through the comments section below.
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what about property purchased after July 2016?
what about the property purchased after July 2016?
Some reports say it would be applicable on all transactions held from now on, while the old transaction would be spared from any interrogation. And other reports say that it can availed on all transaction, be old or new. I am waiting to get a clarity on it, let me find it out. I will share with the readers as soon as i get concrete information on it.
Hi Samra,
Thank you for this.
There is a confusion please:
1. As per this article, those (non-filers) who purchased the plots prior to July 2016 and now they would like to sale that. In this case they would avail this amnesty scheme. It means just pay the tax 4% (on difference between DC and FBR rates) and FBR will not ask about source of funds.
2. However as per another article here, those who would like to purchase property now however they are non-filers and don’t want FBR to probe the source of funds, they would pay this tax (under amnesty scheme) and enter into the fillers list along with property as asset.
Could you please confirm which one or both are applicable
Thank you
Regards,
Ali
But at this stage FBR has not mentioned anything regarding this act officially on its website and also did not mentioned the procedure of Tax.
My question!
What would be the outcome of this ammendment?
Property prices would rise again due to investments in real estste orrrrrrr ////////:???????
You see, tax percentages haven’t been changed and we also await FBR to fix issues in the valuation tables.
The tax amnesty scheme will encourage people with un-taxed money to bring it in the tax net. This, ideally, should not alter the rates.
I believe property market can perform better when FBR fixes the discrepancies in its valuation tables.
Hi Samra,
Can you please make it understandable with one example. How much tax seller have to pay and how much tax buyer will have to pay . Many Thanks
If a property buyer or seller is not a tax evader he will pay the same percentage of tax.
If FBR fixes the valuation tables, tax percentage can come down.
Taxes to be paid by buyers:
Capital Value Tax (CVT)
Rate: 2% of Revised DC Rates
Jurisdiction: Provincial
Stamp Duty
Rate: 3% of Revised DC Rates
Jurisdiction: Provincial
Advance Tax (adjusted in annual income tax returns for filers)
Rate: 2% (filers) or 4% (non-filers) of the FBR Valuation
Jurisdiction: Federal
Taxes to be paid by sellers:
Advance Tax (adjusted against Capital Gains Tax in annual returns for filers)
Rate: 1% (filers) or 2% (non-filers) of the FBR Valuation
Jurisdiction: Federal
Capital Gains Tax (CGT – adjusted against Advance Tax payment in the form of tax credits for filers)
Rate: 10%, 7.5% or 5% of gains based on FBR Valuation
Jurisdiction: Federal
Hi Samra,
Thank you for this.
There is a confusion please:
1. As per this article, those (non-filers) who purchased the plots prior to July 2016 and now they would like to sale that. In this case they would avail this amnesty scheme. It means just pay the tax 4% (on difference between DC and FBR rates) and FBR will not ask about source of funds.
2. However as per another article here, those who would like to purchase property now however they are non-filers and don’t want FBR to probe the source of funds, they would pay this tax (under amnesty scheme) and enter into the fillers list along with property as asset.
Could you please confirm which one or both are applicable
Thank you
Regards,
Ali
Hi Samra,
I just want to confirm that, the prices of property in Karachi either increased or decreased in near future/long term after this amendments. Kindly share your opinion, please.
Thank You
EVEN DAWN SAYS THAT THE AMNESTY IS FOR TRANSACTIONS Before 1 july…and now any NEW TRANSACTION OR TRANSACTION AFTER 1 JULY WILL BE PROBED BY THE FBR…IF THIS IS TRUE THAN NO NEW BUYER WILL COME IN MARKET AND BLACKMONEY WILL NOT ENTER IN MARKET WHICH IS GUD AS PEICES WILL NOW FALL SHARPLY DUE TO THE SELLING PRESSURE AND PROBE BY FBR FOR ALL NEW TRANSACTIONS…BUT SAMRA KINDLY CONFIRM WHETHER THE AMNESTY IS FOR OLD TRANSACTIONS ONLY???DAWN ALSO SAID ITS FOR OLD TRANSACTONS ONLY TO GIVE SAFE PASSAGE TO EXIT THE MARKET FOR SELLERS…
Forget about price rise
Now FBR is involved and EVERYBODY is on their Radar
Purchaser will pay 3% tax and also will be on FBR tax net
So only real purchaser will dare to buy
Investors will not dare to invest anymore
Not all investors, I would say. There are many legit investors, especially overseas Pakistanis, who are totally willing to pay taxes and reveal their source of income.
FBR has taken this move to make real estate transactions transparent and also collect more tax revenue from the property sector.
Hi Samra,
I just want to confirm that, what impact on prices of property(Increased/Decreased/Stable) after new tax act.
Thank you
Hi Samra,
Please confirm that Prices will increase/decreased/stable.
Thank you
Dear Samra,
I have a question on CVT and Stamp duty both provincial taxes. Are these adjustable in a tax payers tax return. Thanks
No 🙂
The Amnesty is applicable to every transaction which happened after 1st july and will happen now , there is no time limit.
This is the golden opportunity to get your money whiten , we all need to develop a tax giving culture , sooner or later more strict rules will be put in place and those who will not take advantage of amnesty now will be left to regret. I remember a few years back how Government used to lay off yearly token on vehicles, however those schemes do not come any more similarly smart people will take advantage of these amnesty schemes and whiten all they have , others will keep on waiting and may well pay huge amounts in future.
I personally believe we should support the culture of Tax . I am horrified by the state of affairs that people are reluctant to give such minor amount of Taxes to the Government. Although i agree that the corruption with in our country is largely to be blamed as people do not trust the Government any more.
I believe that in future Government will get more strict to tax evaders, so it is better to embrace it now or later you may actually be paying a very high price . I remember a few years back how Government used to lay off yearly token on vehicles, however those schemes do not come any more similarly smart people will take advantage of these amnesty schemes and whiten all they have , others will keep on waiting and may well pay huge amounts in future.
Sooner of later we all will be paying taxes , if you want to take advantage , you must do it now.
Hy Samra,
This so called amnesty scheme is totally Rubbish,
Do not know what actually Govt wants,
3% on DC and FBR value difference who is paying?
Seller or Purchaser?
and what about the Remittances and overseas buyer?
Govt actually stops its foreign investments of $10 Billion, and now they are worried itself and announcing this kind of stupid schemes
Please Clarify who is going to pay this 3% ?
Thanks
Ashfaq Muhammad
what is amnesty?
A decision by a government that allows political prisoners to go free.
I live in Karachi. I have the FBR rates. Where can I find DC rates?