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Rate of advance tax on sale, purchase of immovable properties

ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of advance tax on sale and purchase of immovable properties during tax year 2021 (July 01, 2020 to June 30, 2021).

The FBR issued Income Tax Ordinance, 2001 (Updated up to June 30, 2020) after incorporating amendments introduced through Finance Act, 2020.

The FBR updated the rate of tax to be collected under section 236C of Income Tax Ordinance, 2001. The advance tax rate shall be one percent of the gross amount of the consideration received.

The rate of advance tax shall be two percent on a person for not appearing on Active Taxpayers List (ATL).

Following is the text of Section 236C of the Ordinance:

236C. Advance Tax on sale or transfer of immovable Property.—(1) Any person responsible for registering, recording or attesting transfer of any immovable property shall at the time of registering, recording or attesting the transfer shall collect from the seller or transferor advance tax at the rate specified in Division X of Part IV of the First Schedule:

Explanation,—For removal of doubt, it is clarified that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society and registrar of properties.

Provided that this sub-section shall not apply to a seller, being the dependant of a Shaheed belonging to Pakistan Armed Forces or a person who dies while in the service of the Pakistan Armed Forces or the service of Federal or Provincial Government, in respect of first sale of immovable property acquired from or allotted by the Federal Government or Provincial Government or any authority duly certified by the official allotment authority, and the property acquired or allotted is in recognition of or for services rendered by the Shaheed or the person who dies in service.

(2) The Advance tax collected under sub-section (1) shall be adjustable.

Provided that where immovable property referred to in sub-section (1) is acquired and disposed of within the same tax year, the tax collected under this section shall be minimum tax.

(3) Advance tax under sub-section (1) shall not be collected if the immovable property is held for a period exceeding four years.

The FBR also updated rate of advance tax on purchase of immovable properties. The rate of tax to be collected under section 236K shall be one percent of the fair market value.

The advance tax rate shall be two percent on a person for not appearing on Active Taxpayers List (ATL).

The text of Section 236K of Income Tax Ordinance, 2001:

236K. Advance tax on purchase or transfer of immovable property.—(1)Any person responsible for registering, recording or attesting transfer of any immovable property shall at the time of registering, recording or attesting the transfer shall collect from the purchaser or transferee advance tax at the rate specified in Division XVIII of Part IV of the First Schedule.

Explanation,—For removal of doubt, it is clarified that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society and registrar of properties.

(2) The advance tax collected under sub-section (1) shall be adjustable.

(3) Any person responsible for collecting payments in installments for purchase or allotment of any immovable property where the transfer is to be effected after making payment of all installments, shall at the time of collecting installments collect from the allotee or transferee advance tax at the rate specified in Division XVIII of Part IV of the First Schedule.

(4) Nothing contained in this section shall apply to a scheme introduced by the Federal Government, or Provincial Government or an Authority established under a Federal or Provincial law for expatriate Pakistanis:

“Provided that the mode of payment by the expatriate Pakistanis in the said scheme or schemes shall be in the foreign exchange remitted from outside Pakistan through normal banking channels.”