In an effort to boost revenue generation, the Federal Board of Revenue (FBR) has unveiled its plans to raise value rates and withholding taxes on immovable property tax in Pakistan. This decision comes as a result of recent tax hikes on home purchases and sales, set to take effect from July 1, 2023. The FBR intends to implement the new value rates on August 1, 2023, in collaboration with the provincial government.
To make sure the change goes well, the FBR aims to complete the necessary steps in partnership with the provincial government by the end of this month. Reliable sources reveal that the FBR plans to communicate the new rates to the public, which will be applicable in 51 cities and towns, an increase from the current 42.
Presently, the FBR has established property value rates that apply to over 40 cities and towns across Pakistan. These include Abbottabad, Attock, Bahawalnagar, Bahawalpur, Chakwal, Dera Ismail Khan, Dera Ghazi Khan, Faisalabad, Ghotki, Gujranwala, Gujrat, Gwadar, Hafizabad, Haripur, Hyderabad, Islamabad, Jhang, Jhelum, Karachi, Kasur, Khushab, Lahore, Larkana, Lasbela, Lodhran, Mandi Bahauddin, Mansehra, Mardan, Mirpurkhas, Multan, Nankana Sahib, Narowal, Peshawar, Quetta, Rahim Yar Khan, Rawalpindi, Sahiwal, Sargodha, Sheikhupura, Sialkot, Sukkur, Swabi, and Vehari.
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The new value tables for these places will be changed by between 13% and 15% on August 1, 2023. The list will also have nine more cities or towns added to it.The objective behind these changes to the tax system is to broaden the coverage and generate more revenue for the government.
Because of recent changes to sections 236C and 236K of the Income Tax Ordinance of 2001, the tax on the sale or transfer of real property has gone up. Under section 236C, the withholding tax rate for individuals filing income tax returns has risen from 2% to 3% since July 1, 2023. Similarly, for non-filers, the withholding tax rate has increased from 4% to 6%.
Furthermore, the withholding tax rates have also been raised for section 236K, which pertains to advance tax on the purchase or sale of real property. The changes brought about by the Finance Act of 2023, which modified the rates of advance income tax under sections 236C and 236K, are directly responsible for these adjustments. According to the FBR’s field guidelines, filers will now be required to pay an advance tax rate of 3%, while non-filers will face a rate of 6% under section 236C. Similarly, rates for section 236K will be 3% for filers and 10.5% for non-filers.
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The FBR’s decision to raise the value rates and withholding taxes on immovable properties aims to enhance revenue collection and encourage greater compliance with tax obligations in Pakistan. These changes will significantly impact individuals engaged in property transactions, including both buyers and sellers. It is imperative for them to familiarize themselves with the revised rates in order to fulfill their tax responsibilities accurately.
