Karachi, January 13, 2024 – The Federal Board of Revenue (FBR) has made a significant move by granting income tax exemption on the first sale of immovable property during the tax year 2024.
The updated Income Tax Ordinance, 2001, issued by the FBR, includes provisions that offer tax relief on profit and gains from the initial sale of property under specific circumstances.
The latest amendments, detailed in the ordinance for the tax year 2024, specifically address Section 236C, which pertains to Advance Tax on the sale or transfer of immovable property. The FBR has introduced exemptions for individuals falling within the parameters outlined in the proviso to sub-section (1) of Section 236C.
According to the updated provisions, the exemption applies to individuals who have acquired immovable property from or allotted by the Federal Government, Provincial Government, or any authority duly certified by the official allotment authority. The property must be acquired or allotted in recognition of services rendered by a Shaheed (martyr) or an individual who dies in service.
Section 236C, Subsection (1), outlines the requirement for the person responsible for registering, recording, or attesting the transfer of immovable property to collect advance tax at the specified rate mentioned in Division X of Part IV of the First Schedule. This obligation includes various entities such as local authorities, housing authorities, housing societies, cooperative societies, public and private real estate projects registered or governed under any law, joint ventures, private commercial concerns, and registrars of properties.
However, the FBR has provided exemptions to certain sellers under the proviso. Sellers who are dependents of a Shaheed belonging to the Pakistan Armed Forces or individuals who have died while in the service of the Pakistan Armed Forces or the Federal or Provincial Government are eligible for exemption. This exemption specifically applies to the first sale of immovable property acquired from or allotted by the Federal Government, Provincial Government, or any authority duly certified by the official allotment authority. The property must have been acquired or allotted in recognition of or for services rendered by the Shaheed or the person who died in service.
Additionally, the exemption extends to non-resident individuals holding a Pakistan Origin Card (POC), National ID Card for Overseas Pakistanis (NICOP), or Computerized National ID Card (CNIC) who acquired the immovable property through a Foreign Currency Value Account (FCVA) or NRP Rupee Value Account (NRVA) maintained with authorized banks in Pakistan under the foreign exchange regulations issued by the State Bank of Pakistan. For these individuals, the tax collected under Section 236C shall be considered a final discharge of tax liability in lieu of capital gains taxable under Section 37, earned by the seller or transferor from the disposed property.
This move by the FBR is expected to provide relief to individuals who fall within the specified categories, encouraging a more favorable environment for property transactions. The exemptions aim to acknowledge and honor the services of individuals who have contributed to the nation, while also simplifying tax procedures for non-resident individuals holding specific identification cards. As stakeholders and taxpayers navigate through these updated provisions, legal and financial professionals are likely to play a crucial role in ensuring compliance with the revised regulations. The FBR’s decision reflects a balanced approach to taxation, taking into account the unique circumstances of certain property transactions and contributing to a more equitable tax system in Pakistan.
