Karachi: The Karachi Chamber of Commerce and Industry (KCCI) has urged the authorities to extend the deadline for payment under Section 7E of the Income Tax Ordinance, 2001.
KCCI President Mohammed Tariq Yousuf, in a statement, called upon the Ministry of Finance to defer the last date for tax payment under Section-7E, pertaining to tax on deemed income, from December 31, 2022. The KCCI argues that the business community deems Section-7E, inserted through the Finance Act 2022, contrary to the provisions of Article 142 of the constitution.
President KCCI, Mohammed Tariq Yousuf, highlighted that a petition has been filed at the Baluchistan High Court, restraining the Federal Board of Revenue (FBR) from taking coercive measures. With proceedings currently underway, he emphasized the necessity to postpone the last date until the constitutionality of Section-7E is decided.
Many taxpayers have been unable to file their tax returns due to this ambiguity. Therefore, Yousuf stressed the importance of consultation between the business community and FBR to jointly find a resolution to this issue.
Through the Finance Act 2022, deemed income on immovable property has been imposed from the tax year 2022 (July 01, 2021 – June 30, 2022). The declaration of deemed income along with the annual return was made mandatory by November 30, 2022.
Despite challenges and petitions against the imposition of deemed income, the Sindh High Court rejected the petitions through its late October 2022 order, allowing the FBR to levy and collect the tax.
The FBR, through a circular, outlined key points related to tax on deemed income from immovable property. According to the FBR, a new Section 7E was introduced through the Finance Act, 2022, treating a resident person as having derived income equal to five percent of the fair market value of capital assets in Pakistan. This income is then chargeable at a tax rate of 20 percent under Division VIIIC of Part I of the First Schedule of the Ordinance.
Certain exclusions have been provided to which this section will not apply. These include one capital asset owned by the resident person, self-owned business premises where business is conducted, self-owned agriculture land where agricultural activity is carried out, excluding farmhouses and annexed land, and various other specific cases mentioned in the ordinance.
While the legal proceedings are ongoing, the KCCI’s call for the deferment of the tax deadline reflects the concerns and challenges faced by the business community regarding Section 7E. The outcome of the petition and any subsequent decisions will likely have a significant impact on the taxation landscape for affected individuals and entities.
