In an effort to enhance the documentation of trading activities involving plots in private housing societies, the government is considering imposing higher taxes on buyers and sellers of immovable properties in the upcoming budget for the fiscal year 2023-24.
According to insider sources, many private housing schemes currently evade withholding taxes during the trading of plot files across the country. The primary focus of the proposed tax increase will be on registered property agents involved in facilitating transactions between buyers and sellers of immovable properties.
Numerous private housing societies have been circumventing taxes by avoiding the proper declaration of property transfers. This has allowed the trading of plot files to continue without the payment of taxes. To address these activities within private housing schemes, the Federal Board of Revenue (FBR) intends to implement measures in the upcoming budget to ensure the documentation of buyers and sellers and the enforcement of tax payments.
The proposed legal changes aim to ensure the payment of taxes on the buying and selling of plot files within private housing societies, as well as facilitate the proper documentation of immovable properties.
Currently, the government has already increased the tax rate from 100 percent to 250 percent for property purchases made by individuals who are not active taxpayers. The rate of tax to be collected under section 236K has been increased by 250 percent of the specified rate in Division XVIII of Part IV of the First Schedule for purchasers of immovable properties not listed on the Active Taxpayers List. The necessary changes have been incorporated in rule 1 of the Tenth Schedule to the Income Tax Ordinance.
Starting from July 1, 2023, the FBR will release updated property valuation tables. The FBR has initiated the process of updating property valuation tables in consultation with provincial authorities across Pakistan.
To ensure smooth collaboration, the FBR has requested the senior members of the Board of Revenues in Sindh, Balochistan, Punjab, Khyber-Pakhtunkhwa, and Gilgit-Baltistan to nominate representatives for consultation and coordination with the teams formed by the chief commissioners of Regional Tax Offices.
The FBR is currently focusing on tax reforms through the Pakistan Raises Revenue Project (PRRP), in collaboration with the World Bank. One of the significant components of the project is to harmonize property valuation between the FBR and provincial governments/districts.
The proposed tax increase aims to curb tax evasion and improve revenue collection by documenting the trading of housing society files and immovable properties. The government expects these measures to contribute to the overall economic growth and development of the country.
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