Tax law changes to impact 2.5% of property transactions: FBR

ISLAMABAD, JAN 28 (DNA): The Federal Board of Revenue (FBR) has disclosed that 97.5% of property transactions in Pakistan are valued below Rs10 million, indicating that only 2.5% of high-net-worth individuals fall within the FBR’s focus.

This data was shared during a meeting of the sub-committee of the National Assembly Standing Committee on Finance, held at the FBR Headquarters on Monday.

FBR Chairman Rashid Mahmood Langrial said that “The Tax Laws (Amendment) Bill, 2024” will impact just 2.5% of individuals.

About 95% of households would not be affected by the ban on economic transactions of ineligible people and businesses rather they would help increase tax collection, as a missing gap of around Rs1.6 trillion exists in the five percent category compared to Rs140 billion in the rest of the 90-95%.

The people investing in the property sector, he said, have to disclose their source of investment, however, he committed that the FBR was trying to reduce transaction taxes on the real estate sector. Last year 1.695 million property transactions were carried out where 93% of transactions had a value of less than Rs5 million.

Out of this, 3.8% of transactions have a value of less than Rs1 crore. The number of immovable property transactions where the taxable amount exceeds Rs50 million, was 3,250 (0.2%) of the total transactions during 2023-24, FBR chairman disclosed.

On the other hand, in the immovable property transactions in 2023-24 where the taxable amount was up to Rs5 million, the number of transactions was 1,589,328 (93.7%) of the total. The immovable property transactions in 2023-24 where the taxable amount exceeded Rs40 million but did not exceed Rs50 million, the number of transactions was 1,383 (0.1%) of the total.

FBR chairman disclosed that only 12 persons/individuals disclosed their assets above Rs10 billion. There is a massive undervaluation in property transactions in the real estate sector.

Langrial added that there is widespread under-declaration in income tax returns which is not commensurate with the lifestyle of many persons who buy immovable and movable properties, operate current accounts, make investments and carry out businesses without any hindrance.

Arif Habib, Chairman of Arif Habib Dolmen REIT Management Limited recommended that the source of investment in real estate transactions should not be asked for up to Rs50 million. The facility should be allowed for at least one-year period which would result in registrations in the property sector.

Real estate representatives apprehended that “The Tax Laws (Amendment) Bill, 2024” would have serious implications on the real estate sector and the tax officials would have sweeping powers to deal with the real estate sector.