Karachi, November 11, 2024 – In a move aimed at curbing illicit financial activities, the Federal Board of Revenue (FBR) has announced that individuals purchasing immovable property worth Rs 5 million or more through cash payments will face penalties.
The regulation is part of the FBR’s continued efforts to promote transparency and discourage tax evasion in property transactions.
Under the guidelines, any person who purchases immovable property with a fair market value greater than Rs 5 million using cash or bearer cheques will be liable for a penalty. The FBR stated that the penalty would be set at five percent of the property’s value as determined by the FBR under Section 68 or by the provincial authority for stamp duty purposes—whichever amount is higher.
This measure has been introduced as part of the enforcement of Section 75A of the Income Tax Ordinance, 2001, which governs the purchase of assets through banking channels. The section mandates that transactions for immovable property valued at over Rs 5 million must be carried out through a banking instrument such as a crossed cheque, crossed demand draft, or any other form of payment that shows a transfer of funds between bank accounts.
The FBR emphasized that, according to Section 75A, any person who fails to comply with this banking requirement will face serious consequences. Notably, such a transaction will not be eligible for tax allowances under Sections 22, 23, 24, and 25 of the Income Tax Ordinance. Furthermore, the amount paid in violation of this provision will not be treated as the cost for computing any gain upon the sale of the property.
An official of the FBR explained that the aim of this regulation is to reduce the use of cash in high-value property transactions, which is often associated with money laundering and tax evasion. The use of formal banking channels ensures that property deals are documented and traceable, enhancing the government’s ability to track transactions and collect the appropriate taxes.
For many buyers and sellers in the real estate sector, this change represents a significant shift. However, the FBR believes that these measures are necessary to strengthen the economy, ensure fairness in property transactions, and boost overall compliance with tax laws.
As this policy takes effect, individuals involved in property transactions are urged to ensure their payments comply with these regulations to avoid incurring penalties. The FBR is expected to closely monitor transactions and enforce the penalty provisions to maintain a transparent and accountable property market in the country.
