.png)
Streamlined
Tax Payment Method
FBR's Guide to Paying Section 7E Tax on
Property
Sale and Transfer
The
Federal Board of Revenue (FBR) has unveiled the process for tax payments on
deemed income related to the sale or transfer of immovable property, as
outlined in Section 7E of the Income Tax Ordinance, 2001.
As per
Income Tax CIRCULAR NO. 01 OF 2023-24, the FBR identifies any entity
responsible for registering, recording, or attesting the transfer of immovable
property as the "transferring authority." This authority is now
entrusted with the task of collecting advance adjustable income tax from the
seller or transferor, in accordance with section 236C of the Income Tax
Ordinance 2001.
The tax
rate stands at 3% of the gross consideration received by the seller or transferor
if they are listed in the Active Taxpayers' List (ATL). For non-ATL sellers or
transferors, the tax rate is elevated to 6%.
The
Finance Act, 2022 introduced Section 7E, which considers every resident person
to have derived income equal to 5% of the fair market value of capital assets
in Pakistan, with certain exceptions. This deemed income is subject to a tax
rate of 20% (effectively 1% of the fair market value of immovable property).
With
the Finance Act, 2023, a new sub-section (2A) was incorporated into Section
236C of the Ordinance, placing a condition on the transferring authority. The
authority cannot register, record, or attest the transfer of any immovable
property unless the seller or transferor has settled their tax liability under
Section 7E and provided evidence of such payment in the prescribed mode, form,
and manner.
To
accommodate these legislative changes, the FBR issued instructions regarding
the mode, form, and manner of tax collection under Section 7E:
For ATL
Sellers/Transferors:
- The
seller/transferor can present evidence of tax payment under Section 7E through
the FBR online payment system, with a dedicated payment challan (CPR) provided
for this purpose.
- If
the seller/transferor has already declared the property in their tax return for
Tax Year 2022 or if they are exempt from paying tax under Section 7E due to a
court order or authority's stay, they must furnish a certificate (Form 'A')
issued by the relevant Commissioner Inland Revenue.
For Non-ATL
Sellers/Transferors:
- Non-ATL
sellers/transferors must pay the applicable tax under Section 7E and provide
evidence of payment through the FBR online payment system using the CPR.
These
instructions aim to ensure consistent tax payment procedures by all
transferring authorities. The FBR will monitor the process and make necessary
adjustments based on feedback and observations.
This
new tax payment method seeks to facilitate smooth tax compliance and collection
on deemed income during property transactions, thereby streamlining tax processes
and boosting revenue collection.
