Islamabad – The Federal Board of Revenue (FBR) has shed light on the calculation of income tax concerning the fair market value of various assets, services, and properties.
This clarification comes through Section 68 of the Income Tax Ordinance, 2001, as updated up to June 30, 2021, incorporating amendments introduced by the Finance Act, 2021.
Overview of Section 68:
1. Fair Market Value Definition:
• According to Section 68(1), the fair market value of any property, rent, asset, service, benefit, or perquisite at a specific time is defined as the price it would ordinarily fetch on sale or supply in the open market at that time.
2. Exclusion of Restrictions:
• Section 68(2) stipulates that fair market value should be determined without regard to any restriction on transfer or the fact that it is not immediately convertible to cash.
3. Commissioner’s Determination:
• In cases where the price is not readily ascertainable, Section 68(3) empowers the Commissioner to determine the fair market value.
4. Board’s Notification Authority:
• Section 68(4) grants the Board the authority to determine the fair market value of immovable property through notifications in the official Gazette.
5. District Officer’s Role:
• When the Board has not specified the fair market value, Section 68(5) dictates that the value fixed by the District Officer (Revenue) or any other authorized authority for stamp duty purposes shall be deemed the fair market value.
6. Immovable Property Clause:
• Section 68(6) clarifies that, in the context of immovable property, specific components in various sections and schedules shall not be less than the fair market value as determined under sub-sections (4) or (5).
7. Explanation and Disclaimer:
• The section includes an explanation stating that the fair market value, as determined under sub-sections (4) or (5), is for the sole purpose of implementing the Income Tax Ordinance. It further clarifies that, for certain purposes, if the fair market value differs from the auction price, the higher of the two values shall be applicable.
Disclaimer: The Federal Board of Revenue emphasizes that the provided text is for informational purposes only. While efforts are made to provide accurate information, the FBR is not responsible for any errors or omissions.
This clarification aims to ensure transparency and understanding regarding the computation of fair market value, contributing to a more informed tax environment for taxpayers and authorities alike.
