Valuation of immovable property identified as concealed asset

Valuation of immovable property identified as concealed asset

ISLAMABAD – The Federal Board of Revenue (FBR) has issued determinations regarding the valuation of immovable properties identified as concealed or undeclared assets under Section 111 of the Income Tax Ordinance, 2001.

The guidelines, detailed in the updated Income Tax Rules, 2002 (up to September 08, 2020), provide a comprehensive framework for determining the fair market value of such properties.

Valuation Criteria

1. Fair Market Value Notification:

• For immovable properties in specified areas, the fair market value is determined based on notifications issued by the FBR under sub-section (4) of Section 68 of the Income Tax Ordinance, 2001.

• The value notified by the Board serves as the benchmark for calculating the fair market value.

2. Undetermined Fair Market Value:

• If the fair market value of immovable property in any area has not been determined by the FBR through notifications, the value is deemed to be the one fixed by the District Officer (Revenue) or any provincial or authorized authority for stamp duty purposes.

• This ensures consistency with established stamp duty valuations.

3. Agricultural Land Valuation:

• In the case of agricultural land, the value is equal to the average sale price recorded in the revenue record of the estate where the land is situated for the relevant period or time.

• This method aligns with the agricultural context, providing a fair representation of the property’s value.

Comparative Price Determination

4. Sale Price vs. Fair Market Value:

• If the sale price recorded in the instrument of sale is higher than the fair market value determined through the specified criteria (notification, stamp duty, or agricultural land valuation), the higher of the two values is considered applicable.

• This ensures that the declared sale price does not fall below the fair market value, preventing potential undervaluation of the property.

Auctioned Property Consideration

5. Auctioned Property Valuation:

• In cases involving auctioned properties, the valuation is determined based on the higher of the sale price or the fair market value determined through the specified criteria.

• This provision ensures that the highest applicable value is considered for tax assessment purposes.

Ensuring Fairness and Accuracy

The FBR’s outlined valuation rules aim to ensure fairness and accuracy in determining the value of immovable properties identified as concealed or undeclared assets. By providing clear criteria, the guidelines contribute to transparency in the assessment process, preventing undervaluation and ensuring that tax liabilities are based on accurate property valuations.

Impact on Tax Compliance

The clarity provided in the Income Tax Rules, 2002, empowers both taxpayers and tax authorities by establishing a standardized approach to property valuation. This, in turn, contributes to enhanced tax compliance, discouraging any attempts to conceal or undervalue assets.

Conclusion

The FBR’s determination of the value of concealed immovable properties under Section 111 reflects a commitment to fairness and transparency in tax assessment. The guidelines provide a structured framework for assessing the fair market value of properties, utilizing notifications, stamp duty valuations, and agricultural land sale prices. By adhering to these valuation rules, the FBR aims to foster tax compliance, prevent undervaluation, and ensure a level playing field for all taxpayers.