FBR to Tax Late Filers on Property Deals from July 1

FBR to Tax Late Filers on Property Deals from July 1

Starting July 1, 2024, the Federal Board of Revenue (FBR) will commence the collection of advance tax on property transactions from late filers after the approval from the parliament. This move aims to tighten tax compliance and discourage the trend of filing tax returns only when engaging in property transactions.

Currently, the FBR collects advance tax from property buyers and sellers, with different rates applied to filers and non-filers. As per FBR sources, the rate of advance tax on the purchase, sale, or transfer of property stands at 3 percent of the Fair Market Value or the consideration received.

The proposed tax regime introduces progressive advance tax rates for three distinct categories:

1. Persons appearing in the Active Taxpayers List (ATL).

2. Persons not appearing in the ATL.

3. Persons appearing in the ATL who have filed their returns after the due date or the extended due date, referred to as late filers.

The FBR sources said the amendment aims to curb the practice of filing returns solely to avoid the higher tax rates applicable to non-ATL individuals under the Tenth Schedule.

The enhanced rates for late filers will be higher than those for regular ATL individuals but lower than those for non-ATL persons.The proposed advance tax rates for these categories are as follows:

Advance Tax on Sale or Transfer of Immovable Property:

Gross Consideration ReceivedTax Rate (ATL)Tax Rate (Late Filers)Tax Rate (Non-ATL)
Up to Rs. 50 million3%6%10%
Over Rs. 50 million to Rs. 100 million3.5%7%10%
Exceeding Rs. 100 million4%8%10%

Advance Tax on Purchase of Immovable Property:

Fair Market ValueTax Rate (ATL)Tax Rate (Late Filers)Tax Rate (Non-ATL)
Up to Rs. 50 million3%6%12%
Over Rs. 50 million to Rs. 100 million3.5%7%16%
Exceeding Rs. 100 million4%8%20%

These new rates are designed to ensure that late filers are subjected to a more stringent tax regime, thereby promoting timely tax return submissions and enhancing overall tax compliance.

The FBR’s decision reflects its ongoing efforts to broaden the tax base and increase revenue collection. By implementing these measures, the FBR aims to foster a more disciplined approach to tax filing and curb the avoidance tactics often employed by property market participants.

This initiative of the FBR is expected to significantly impact property transactions and encourage taxpayers to adhere to deadlines, thus streamlining the tax collection process and ensuring equitable contribution from all taxpayers.