Non-ATL to pay 20 percent tax on property sale through auction

KARACHI: Properties sold through auction to attract 20 percent advance tax for persons not appearing on Active Taxpayers List (ATL).

According to Income Tax Ordinance, 2001 updated till June 30, 2019 the advance tax rate on sale of property through auction would be 10 percent for persons, who filed their income tax returns by due date or filed after paying penalty.

However, the tax rate has been prescribed at 20 percent for persons not appearing on the ATL.

A taxpayer will only qualify for the ATL when he files annual income tax returns by due date or filed after due date with paying penalty.

Through Finance Act, 2019 a new Tenth Schedule was introduced to Income Tax Ordinance, 2001 under which persons not appearing on ATL will pay 100 percent additional tax.

Section 236 A of the Ordinance explained the advance tax at the time of sale by auction:

Section 236A: Advance tax at the time of sale by auction

Sub-Section (1): Any person making sale by public auction or auction by a tender, of any property or goods (including property or goods confiscated or attached) either belonging to or not belonging to the Government, local Government, any authority, a company, a foreign association declared to be a company under sub-clause (vi) of clause (b) of sub-section (2) of section 80, or a foreign contractor or a consultant or a consortium or Collector of Customs or Commissioner of Inland Revenue or any other authority, shall collect advance tax, computed on the basis of sale price of such property and at the rate specified in Division VIII of Part IV of the First Schedule, from the person to whom such property or goods are being sold.

Sub-Section (2): The credit for the tax collected under sub-section (1) in that tax year shall, subject to the provisions of section 147, be given in computing the tax payable by the person purchasing such property in the relevant tax year or in the case of a taxpayer to whom section 98B or section 145 applies, the tax year, in which the “said date” as referred to in that section, falls or whichever is later.

Explanation.- For the purposes of this section, sale of any property includes the awarding of any lease to any person, including a lease of the right to collect tolls, fees or other levies, by whatever name called.

Sub-Section (3): Notwithstanding the provisions of sub-section (2), tax collected on a lease of the right to collect tolls shall be final tax.”

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