Advance tax on immovable property: FBR withdraws holding period exemption, Aug 09-2022

LAHORE: The Federal Board of Revenue (FBR) has withdrawn the holding period exemption for the collection of advance tax on sale or transfer of immovable property.

Sub-section (3) of section 236C of the Income Tax Ordinance, 2001 has been omitted.

“Now advance tax on sale or transfer of immovable property will be collected under this section irrespective of holding period,” the FBR added.

The Board has introduced changes through a notification in the Income Tax Ordinance 2001 for the collection of withholding taxes on sale or purchase of immovable property.

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According to the notification, the advance tax would be collected from every seller irrespective of the holding period. Earlier, an exemption was available for a seller if he held the property for at least 4 years.

Furthermore, the rate of tax for non-filers has been increased by 100% for 236C and 250% for 236K. The rate of advance tax on sale and purchase of immovable property has been enhanced by 100%.

WITHHOLIDNG TAX RATE ON SALE OF IMMOVABLE PROPERTY:
The withholding tax rate is 2 per cent of gross amount of consideration received on sale of immovable property by persons who are on the Active Taxpayers List (ATL) under Section 236 C of Income Tax Ordinance, 2001. However, the rate shall be enhanced by 100 per cent to 4 per cent for persons not on the ATL.     

Section 236C. Advance Tax on sale or transfer of immovable Property

(1) Any person responsible for registering, recording or attesting transfer of any immovable property shall at the time of registering, recording or attesting the transfer shall collect from the seller or transferor advance tax at the rate specified in Division X of Part IV of the First Schedule:

Explanation,—For removal of doubt, it is clarified that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society, public and private real estate projects registered/governed under any law, joint ventures, private commercial concerns and registrar of properties.

The tax rate has been enhanced on property transaction through Finance Act, 2022. The FBR said the rate of advance tax on sale or transfer and on purchase or transfer of immovable property has been enhanced from 1% to 2%.     

Meanwhile, in case of purchaser of immovable property who is not appearing on the active taxpayers list, rate of tax to be collected under section 236K of the Income Tax Ordinance, 2001, will increase by 250% of the rate specified in Division XVIII of Part IV of First Schedule. Necessary change has been incorporated in rule 1 of Tenth Schedule to the Income Tax Ordinance 2001, the FBR added.

With Ref from Copyright Business Recorder, 2022