Karachi, August 16, 2023 – The Federal Board of Revenue (FBR) has announced a relaxation in the conditions governing Section 7E of the Income Tax Ordinance, 2001, specifically aimed at sellers of immovable property.
The change was conveyed through the issuance of Circular No. 3 of Income Tax on August 15, 2023.
READ MORE: Big Jump: 4.38 Million Pakistani Citizens Join Active Taxpayers List
The FBR revealed that it had been inundated with numerous appeals concerning the methods of presenting evidence for the application of Section 7E, as outlined in sub-section (2A) of section 236C of the Ordinance, for the sale or transfer of immovable property.
With the objective of eliminating any complications that might arise from the introduction of sub-section (2A), the FBR has partially revised the instructions detailed in Circular No.1 of 2023-24, released on July 21, 2023. This adjustment has been made to ensure smoother implementation and to accommodate specific situations.
READ MORE: FBR Keeps an Eye on Cash Withdrawals from Banks to Expand Tax Base
The key highlights of the modified conditions are as follows:
Exemption for Non-Resident Individuals: Non-resident individuals, including non-resident Pakistanis, are exempt from tax under section 78. Consequently, the conditions stipulated in Circular No. 1 will not apply to them. However, they are required to submit relevant documents along with a duly filled form to the transferring authority.
Special Cases Exempted: Individuals who fall under specific categories, such as Shaheeds (martyrs) or their dependents, armed forces personnel, war-wounded individuals, and ex-servicemen, are exempt from the conditions of Circular No. 1, provided they can present valid evidence.
READ MORE: FBR Introduces Mandatory Verification Form for Property Sellers Under Section 7E
Exemption for First-Year Property Acquisition: Properties acquired during the first year, for which tax under section 236K has been paid by the purchaser, are exempt from the provisions of Section 7E. In such cases, the seller must provide a Computerized Payment Receipt (CPR) to the transferring authority.
Agriculture Property Exemption: Immovable property used for agriculture and excluding farmhouses is not subject to Section 7E. However, if farmhouses are involved, the conditions of Circular No. 1 will apply to them.
Exemption for Registered Local Authorities and Developers: Immovable property owned by local authorities, development authorities, builders, or developers registered with the Directorate General of Designated Non-Financial Business and Professions (DNFBP) are also exempt. These entities must provide proper certificates to the transferring authority.
READ MORE: Mastermind Behind Fake Invoice Scam Apprehended by Karachi’s IR Intelligence
It’s important to note that the contents of the circular remain mostly unchanged, and it will be valid until an automated system is developed for this purpose.
The modifications introduced by FBR are expected to streamline property transactions and provide clarity to both sellers and transferring authorities. This development is expected to contribute to a more efficient and transparent property market.
