The Federal Board of Revenue (FBR) has issued instructions regarding the mode and manner for payment of tax under section 7E of the Income Tax Ordinance 2001 on the sale or transfer of immovable properties.
In this regard, the FBR issued circular 1 of 203 here on Monday for all Chief Commissioners of Inland Revenue.
Under section 236C of the Income Tax Ordinance 2001(the Ordinance), any person responsible for registering, recording, or attesting transfer of any immovable property has been designated as the person responsible (‘transferring authority’) to collect advance adjustable Income tax from the seller or transferor.
The rate of tax collection is 3% of the gross amount of the consideration received by the seller or transferor in case of the seller’s/transferor’s name if appearing on the Active Taxpayers’ List (ATL) and 6% in case of non-ATL seller/transferor.
Through Finance Act, 2022 section 7E was introduced whereby, for the tax year 2022 and onwards, every resident person has been treated to have derived as income, an amount equal to 5% of the fair market value of the capital asset situated in Pakistan subject to exclusions of the capital assets provided under sub-section (2). The said deemed income is chargeable to tax at the rate of 20% (effective rate 1 percent of the fair market value of immovable property).
Finance Act 2023 has introduced a new sub-section (2A) in section 236C of the Ordinance which places a bar on the transferring authority for registering, recording, or attesting transfer of any immovable property unless the seller or transferor has discharged his tax liability under section 7E of the Ordinance and evidence to this effect has been furnished to the transferring authority in the prescribed mode, form and manner.
The following instructions are issued for catering for situations arising out of a change in law prescribing mode, form, and manner of collection of payment of tax u/s 7E:
Where the seller or transferor is on ATL:
The said seller or transferor will provide evidence to the transferring authority that he has discharged his liability u/s 7E in any of the following modes:
If the seller/transferor has not already paid the tax u/s 7E along with his income tax return filed for TY 2022, then, such person is required to pay the due amount of tax payable under section 7E of the Ordinance and produce evidence to the transferring authority. For this purpose, a separate payment challan (CPR) has been provided in FBR online payment system. The payment made into government treasury through CPR in this regard will be treated as evidence for the purpose and to the extent of newly inserted sub-section (2A) of section 236C of the Ordinance; or
If the seller/transferor has already declared the said property in his declaration u/s 7E filed along with his income tax return for tax year 2022 or the said seller/transferor is not required to pay tax u/s 7E due to any stay granted by any court of law or authority, then the seller/transferor will furnish a certificate annexed as Form ‘A’ to this circular duly issued by the Commissioner Inland Revenue holding jurisdiction over the seller/transferor. The certificate issued by the Commissioner of Inland Revenue will be treated as evidence for the purpose and to the extent of newly inserted sub-section (2A) of section 236C of the Ordinance;
For the purpose of issuance of the above certificate, the seller/transferor will fill the requisite particulars in the attached Form ‘A’ and submit the same to the Commissioner Inland Revenue holding jurisdiction over the person. The Commissioner Inland Revenue will examine the particulars and will accordingly issue the certificate.
The said certificate will be issued by the Commissioner of Inland Revenue within 7 days of the receipt of the pre-filled form ‘A’ submitted by the seller/transferor.
If the property owner is more than one person, each person shall discharge liability u/s 7E with respect to his or her respective share in the said property in any of the modes described above.
Where the seller/transferor is a non-ATL person:
Such a person is required to pay the due amount of tax payable under section 7E of the Ordinance and provide evidence to the transferring authority. For this purpose, a separate payment challan (CPR) has been provided in FBR online payment system. The payment made to the government treasury through CPR in this regard will be treated as evidence for the purpose and to the extent of the newly inserted sub-section (2A) of section 236C of the Ordinance.
These instructions have been issued for the uniform application of procedure by all transferring authorities. Based on the feedback and monitoring of the procedure, suitable amendments if necessary will be made to these instructions, FBR added.
Source: Pro Pakistani