Karachi, December 6, 2024 – The Federal Board of Revenue (FBR) has announced updated advance tax rates on the purchase and transfer of immovable property for the tax year 2025. These updates, implemented under the Finance Act, 2024, have been incorporated into the Income Tax Ordinance, 2001, and specifically explained under Section 236K of the ordinance.
Section 236K outlines the rules for collecting advance tax at the time of property registration, transfer, or allotment, according to the FBR. As per the revised provisions:
Key Provisions of Section 236K
1. Collection of Advance Tax
Sub-section (1) mandates that individuals responsible for registering, recording, or attesting the transfer of immovable property must collect advance tax from the buyer or transferee. This applies to local authorities, housing societies, cooperative societies, public and private real estate projects, and registrars of properties.
2. Adjustable Advance Tax
Sub-section (2) clarifies that the advance tax collected is adjustable against the purchaser’s final tax liability. However, for non-resident individuals holding a Pakistan Origin Card (POC), National Identity Card for Overseas Pakistanis (NICOP), or Computerized National Identity Card (CNIC), who acquire property through Foreign Currency Value Accounts (FCVA) or NRP Rupee Value Accounts (NRVA), the tax collected is considered a final discharge of liability.
3. Tax on Installments
Sub-section (3) specifies that for properties purchased through installment plans, advance tax is collected with each installment. Once the cumulative tax amount equals the required rate, no additional tax will be collected when the property is transferred to the buyer.
4. Exemption for Expatriate Schemes
Sub-section (4) provides exemptions for property purchased under federal or provincial government schemes designed for expatriate Pakistanis. These transactions must be made in foreign exchange remitted through formal banking channels.
Implications of the Changes
With these updates the FBR aims to improve compliance and transparency in real estate transactions while addressing the unique circumstances of overseas Pakistanis. The adjustments also streamline the taxation process for installment-based property purchases and encourage proper documentation in property dealings.
The FBR emphasizes that these changes are part of ongoing efforts to increase revenue collection and curb tax evasion in the real estate sector, a significant contributor to Pakistan’s economy.
With these new provisions, taxpayers, particularly property buyers, are advised to stay informed and ensure compliance with the updated tax requirements. Further details and specific rates can be referenced in Division XVIII of Part IV of the First Schedule to the Income Tax Ordinance, 2001.
Advance Tax on purchase of immovable property under Section 236K
| Description | On ATL | Tax rate for late filers | Not on ATL |
| Where the fair market value does not exceed Rs 50 million | 3% | 6% | 13% |
| Where the fair market value exceeds Rs 50 million but does not exceed Rs 100 million | 3.5% | 7% | 16% |
| Where the fair market value exceeds Rs 100 million | 4% | 8% | 20% |
