Citizens involved in property transactions outside the banking system are now facing a tax penalty, according to tax experts. This development follows heightened taxation measures on buying and selling immovable properties and an increase in property valuation rates by the Federal Board of Revenue (FBR).
The issue stems from penalties imposed under the Income Tax Ordinance, 2001, on property purchases conducted through non-banking transactions. These penalties are being levied as part of an effort to enforce financial transparency and curb undocumented transactions in the real estate sector.
According to Section 75A of the Income Tax Ordinance, 2001, read with entry no. 21 of Chapter X, a five percent penalty applies to property purchases made outside the banking system if the fair market value of the property exceeds five million rupees. Similarly, for other assets exceeding one million rupees in value, the penalty is also applicable. These measures aim to promote banking transactions and ensure proper documentation in financial dealings.
The Board of Revenue of Punjab recently issued a directive to the Registrar Cooperative Societies, Punjab, the Director General of the Punjab Land Records Authority, and district registrars and deputy commissioners across the province. The directive mandates the recovery of penalties from sub-registrars, assistant directors of land records, and transferring officers who serve as withholding agents in property transactions.
During a pre-Public Accounts Committee (PAC) meeting chaired by the Senior Member of the Board of Revenue, Punjab, concerns were raised regarding the non-compliance of withholding agents in collecting these penalties. The authorities expressed dissatisfaction over the lack of progress and instructed field formations to ensure strict compliance with the law.
A subsequent circular from the Board of Revenue of Punjab emphasized that sub-registrars, assistant directors of land records, and transferring/attesting officers must enforce the penalty. Failure to do so will result in accountability for the concerned officers.
The imposition of these penalties has sparked debate among property buyers and sellers, many of whom feel burdened by increasing costs and stringent regulations. Tax experts, however, argue that these measures are essential to bring undocumented transactions into the formal economy and enhance government revenue.