Property Buyers And Sellers To Suffer Huge Taxes!
The Federal Board of Revenue (FBR) has said that Finance Act 2016 will need a builder, land developer, house owner or property dealer to offer a specified final tax based on the specific rate of the city and its area, which will be set by SBP.
The amendments made are:
- The Commissioner no longer has the power to value a property. The task will be handled by SBP approved panel of “valuers”. The binding nature of value determined by provincial revenue authorities for collecting stamp duty has also been revoked.
- Section 15 says that income tax will be charged based on “gross income basis” instead of “net income basis” for individuals as well as Association of Persons (AOP) as a separate block of income tax.
- Property rental receipts will now be charged under section 15A with no deductions of allowances allowed. Final discharge of tax liability will be based on Section 155 for individuals and AOPs.
“All taxes will be based on the value of property” prescribed by the District Collector. “And no property can cost less than that.”
- For sellers, Withholding tax (WHT) on the transfer of immovable property has been increased 1% for filers and 2% for non-filers. This tax is only applicable if the property was acquired within last 5 years.
- For buyers, Withholding tax (WHT) on the transfer of immovable property has been increased to 2% for filers and 4% for non-filers.
- For land developers and sellers, a capital gain tax will be applicable when disposing of /selling an immovable property which was acquired within the past 5 years. Income will be taxed at 10%, double of what it used to be. Previously, people were charged 5% if the property was 1 year old and 10% if it was two years old and the rest was tax-free.
- Withholding Tax (WHT) rates for rent payers and landlords have also been mentioned in Division VI and Division V respectively. The rates have been listed as tables in the document.
- Income derived from the property including rental income for individuals or Association of Persons (AOP) will not be taxed if it is lower than Rs. 200,000 and the filer have no other source of income.
- Gains from the disposal of immovable property by a person in a tax year to a Rental REIT Scheme will be taxed at 5% up to 30th June 2019.
- Property income by companies will continue to be taxed at the existing rates and regulations.
One advantage of this act is that it would stop the black money process. However, the crimes against the sales process would still be the same!