Illusion Of Rise in Housing Properties After Filing Tax

After the influence of the present government in filing tax for all the properties including all the sectors has created chaos among Pakistanis. We have also seen enquiries from non-filers and lockdowns of traders. Along with it, the housing sector has also been affected by the budget of FY2019-2020, in which you can see amendments for the property holders.

The below discussion is highlighting the minor changes in buying and selling of the properties, including FBR property valuation, filers & non-filers, withholdings tax rates and Capital gain tax regime and involvement of the bank in registration.

Tax valuation increased by 85% of the market value

The valuation of Federal Board Reservation (FBR) for properties raised to 85% from the current market value. Furthermore, the differentiation among legislation of properties through DC and FBR will not remain further.

Under the amnesty scheme, a 3% tax will be required to whiten your property and removing the difference between DC and FBR. Under instructions of Revenue Minister, Azhar, property holders are abided to pay 30% tax on their property.

Decrease in withholding tax

In the cases of property cases, Withholding Tax (WHT) has implemented on the property holders in the following cases:

• WHT was imposed only on the property of more than PKR 4 million. This sanction has changed and now it is imposed on all properties without considering their value.

• Previously, if a property is sold after 3 years, no WHT was imposed on it. From this year, the time limit has extended.
• WHT imposes on the property buyers dropped off from 2% to 1%.

Prohibition for Non-Filers

Former Finance Minister, Asad Umar, has announced in the last budget that non-filers with the property amounted to 5 million or more, will be investigated and more tax will be implied on them hence in this budget:

• Non-filers with the property of more than PKR 5 million will be investigated.

• Non-Filers with the property of more than PKR 5 million are abided to pay double taxes.

Capital Gain Regimes for Immovable Properties

The immovable properties are implied to pay Capital Gain Tax (CGR) on the Net Present Value (NPV). It will not be charged on the buying price nor on the selling price. Sanctions for the CGT of plots and constructed property are:

1. In the case of the sale of plots or constructed property, a 100 percent tax will be received.
2. There will be a 75% tax on the gains if plots are sold after one year and before 10 years. In the       situation of constructed property after the first year of purchase and after 5th year of purchase 75% tax   will be implied.
3. There will be no tax deduction on plots after 10 years of the purchase and in the situation of the     constructed property after 5 years of the purchase.

Involving bank in process of buying and selling

In this budget, every buyer and seller of the property involved in the transaction will have to use the bank instrument. This is also the case of non-filers who are allowed to buy a property worth more than PKR 5 billion, so it is mandatory for them as well to make the transaction using banking instruments.