KARACHI, September 17, 2024 – The Federal Board of Revenue (FBR) has officially announced the determination of fair market values for assets and properties under the Income Tax Ordinance, 2001, applicable for the tax year 2024-25.
This move is aimed at ensuring accurate tax assessments and curbing under-declaration of assets, especially in real estate and other high-value sectors.
The FBR’s update, released up to June 30, 2024, introduces several key guidelines regarding the valuation of assets, including immovable property, as outlined under Section 68 of the Income Tax Ordinance. These valuations form the foundation for tax liabilities, ensuring that assets are taxed based on their actual market worth, irrespective of artificial restrictions or manipulation.
Defining Fair Market Value
As per the FBR’s explanation, the fair market value of any asset, service, or benefit at a given time refers to the price that the asset would normally fetch in an open market transaction at that time. This includes property, rent, or any other taxable perquisite.
The valuation must be determined without consideration of any transfer restrictions or whether the asset is easily convertible into cash, reinforcing the principle that the market price reflects the genuine worth of an asset, free from artificial constraints.
Role of the Commissioner
In cases where the fair market value of an asset, excluding immovable property, is not readily ascertainable, the Commissioner is empowered to determine its value. This gives the FBR flexibility in addressing complex valuations for assets that may not have a transparent market rate.
Special Focus on Immovable Property
For immovable property, the FBR has retained the authority to periodically determine and notify fair market values through official gazette notifications. These notifications specify the value of immovable properties across designated areas, ensuring consistency and transparency in property tax assessments.
If no such notification has been issued for a specific area, the fair market value is deemed to be the value assigned by the District Officer (Revenue) or any other provincial authority responsible for stamp duty purposes. This dual approach allows for a comprehensive valuation mechanism that can adapt to different regional contexts.
Ensuring Compliance with Higher Market Prices
The ordinance further clarifies that the fair market value, as determined by the FBR or relevant local authorities, must not be less than the valuation used for stamp duty purposes or any auction price. If a discrepancy arises between these values, the higher of the two will be applicable for tax purposes.
This provision aims to eliminate undervaluation, a common issue in real estate transactions, and ensure that assets are taxed according to their real worth, not artificially deflated prices.
The FBR’s latest guidelines mark a significant step toward enhancing transparency and ensuring equity in the taxation of assets across Pakistan.
