Islamabad – The Federal Board of Revenue (FBR) is intensifying its efforts to ensure transparency in Pakistan’s real estate sector by scrutinizing the source of income used in property transactions. This initiative is aimed at combating tax evasion and fostering accountability within the industry.
FBR Chairman Rashid Mahmood Langrial revealed that the authority is working to reduce transaction taxes in the real estate sector to encourage compliance. However, he emphasized that individuals investing in property must disclose the origins of their funds. This measure is intended to address the widespread issues of undervaluation and misdeclaration that have plagued the sector for years.
The extent of these challenges was highlighted by data from the fiscal year 2023-24, which indicated that over 93.7% of property transactions in Pakistan were valued below Rs 5 million. These figures underscore the pervasive practice of underreporting property values to avoid taxation.
On Monday, representatives from the real estate sector urged the National Assembly Standing Committee on Finance and Revenue to amend “The Tax Laws (Amendment) Bill, 2024.” They proposed an exemption from disclosing the source of investment for property transactions valued up to Rs 50 million. However, during a meeting of the sub-committee at FBR Headquarters, Chairman Langrial clarified that the proposed legislation would impact only 2.5% of investors. He assured that 95% of households would remain unaffected by these measures, which are designed to curtail economic activities of ineligible entities and enhance tax collection.
Highlighting the significant tax gap, Langrial noted that the top 5% of property transactions account for a missing revenue potential of Rs 1.6 trillion, compared to just Rs 140 billion in the remaining 90-95%. This disparity underscores the need for stringent regulations targeting high-value transactions.
According to the FBR’s data, 1.695 million property transactions were recorded in 2023-24. Of these, a staggering 93.7% were valued under Rs 5 million. In contrast, only 3,250 transactions (0.2%) exceeded Rs 50 million in taxable value. This data highlights the urgent need for reforms to address income concealment and promote a fairer tax system.
The FBR’s renewed focus on accountability and tax compliance aims to establish a more equitable real estate market, ensuring that all stakeholders contribute their fair share to national revenue.