KARACHI: A major shift in taxation on property income has been introduced through Finance Bill, 2021 and all taxpayers shall be subject to uniform taxation on net-income basis at the applicable rates.
According to commentary on budget 2021/2022 and Finance Bill, 2021, by PwC A. F. Ferguson & Co. Chartered Accountants, at present, Individuals and Association of Persons (AOPs) can opt for their property income to be chargeable to tax on gross rent without any deductions, at specified (lower) tax rates.
Companies’ property income, however, is subject to tax after certain admissible deductions at applicable corporate rate.
Through the proposed amendments, property income for all taxpayers shall henceforth be subject to uniform taxation on net-income basis at the applicable rates.
Withholding tax rates applicable to the property income of Individuals and AOPs are also proposed to be revised as under:
1. Where the gross amount of rent does not exceed Rs300,000: No tax shall be levied
2. Where the gross amount of rent exceeds Rs. 300,000 but does not exceed Rs. 600,000: the tax shall be 5 per cent of the gross amount exceeding Rs. 300,000
3. Where the gross amount of rent exceeds Rs. 600,000 but does not exceed Rs. 2,000,000: the tax shall be Rs15,000 plus 10 per cent of the gross amount exceeding Rs. 600,000
4. Where the gross amount of rent exceeds Rs. 2,000,000: the tax shall be Rs155,000 plus 25 per cent of the gross amount exceeding Rs. 2,000,000.
Further, the adjustment of property income for a tax year against loss under any other head of income is proposed to be reinstated.
The adjustment of such losses could give rise to a situation where effectively no tax is payable on property income.
In order to give full effect to this amendment, the Government may, therefore, consider introducing enabling provision for issuance of exemption / reduced rate certificates in eligible cases.