Karachi, August 2, 2024 – The Federal Board of Revenue (FBR) has announced the introduction of progressive tax rates on the sale and purchase of immovable property, effective from July 1, 2024. This change, brought about through the Finance Act, 2024, aims to create a more equitable tax structure for property transactions.
Under the new regulations, the rates of advance income tax on the sale of immovable property are based on the gross amount of consideration received. The revised rates are as follows:
1. For property transactions where the gross amount of consideration received does not exceed Rs 50 million, the tax rate is set at 3%.
2. For transactions where the gross amount of consideration received exceeds Rs 50 million but does not exceed Rs 100 million, the tax rate is 3.5%.
3. For transactions where the gross amount of consideration received exceeds Rs 100 million, the tax rate is 4%.
Similarly, the FBR has applied progressive tax rates on the purchase value of immovable property based on its fair market value. The new rates are:
1. For properties with a fair market value not exceeding Rs 50 million, the tax rate is 3%.
2. For properties with a fair market value exceeding Rs 50 million but not exceeding Rs 100 million, the tax rate is 3.5%.
3. For properties with a fair market value exceeding Rs 100 million, the tax rate is 4%.
The FBR stated that these adjustments are designed to ensure a fairer tax system and to increase compliance among property buyers and sellers. By implementing progressive tax rates, the FBR aims to balance the tax burden more effectively across different segments of property transactions.
Tax experts have noted that this move will likely encourage transparency in property transactions, as the tax rates are directly linked to the transaction value. This could lead to a reduction in underreporting of property values, a common issue in the real estate sector.
The revised tax rates are part of a broader strategy by the FBR to enhance revenue collection and streamline tax administration. Property buyers and sellers are advised to familiarize themselves with the new rates and ensure accurate reporting of transaction values to avoid potential penalties.