The Federal Board of Revenue (FBR) has temporarily suspended the planned rise in immovable property valuations until September 2023.
The decision follows extensive deliberations between FBR Chairman Amjad Zubair Tiwana and a delegation of tax officials and representatives from the real estate sector. The discussions culminated in a mutual agreement to defer the implementation of augmented property values until September 2023. The FBR had initially intended to introduce revised property valuations in the current month.
To address inconsistencies in property values, the FBR will establish local committees in each city, collaborating closely with real estate associations. The board is scheduled to reconvene in September 2023 to finalize a uniform 10% increase in property values applicable to all immovable properties.
An innovative enhancement is set to be incorporated into the updated ‘IRIS’ system, allowing citizens to conveniently apply for exemptions or effectuate the 1% tax payment on immovable properties under Section 7E. Notably, this online feature is designed to remove the involvement of the Commissioner of Inland Revenue (FBR), thereby eliminating discretion in matters about the Income Tax Ordinance, 2001, Section 7E.
The Finance Act of 2022 introduced a novel Section 7E, mandating residents to declare 5% of the fair market value of their domestic capital assets as income, subsequently subject to a 20% tax rate, effectively translating to 1% of the property’s value. Acknowledging challenges in implementing this new provision, the FBR has assured vigilance to prevent potential misuse of Section 7E powers by the Commissioner of Inland Revenue in granting exemptions.
In parallel development, an amendment to section 236C of the Ordinance has been introduced through the Finance Act of 2023. This amendment stipulates that property transfers cannot be executed unless the seller has fulfilled their tax obligations under section 7E and provided verifiable proof of payment to the relevant transferring authority via the prescribed form.
Pakistan Revenue Automation Limited (PRAL) has streamlined this process by updating the FBR’s IRIS system. Taxpayers can conveniently access section 7E documents in their IRIS accounts, with the system automating exemption grants or facilitating tax payments as required.
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