The Federal Board of Revenue (FBR) has directed field formations that pursuant to the issuance of Income Tax (Amendment) Ordinance, 2016, the withholding tax on sale and purchase of immovable properties shall be collected on FBR notified rates of immovable properties.
In this regard, the FBR has issued instructions to all Chief Commissioners of Regional Tax Offices (RTOs) here on Tuesday on the determination of fair market value under section 68 of Income Tax (Amendment) Ordinance, 2016.
Prior to Finance Act, 2016, fair market value for the purpose of probing the source of investment in acquisition of immovable property was determined by the Commissioner. However, under the Income Tax Rules fair market value was to be determined as value fixed for the purpose of collecting stamp duty by the provincial revenue authorities and was binding upon the Commissioner Inland Revenue Similarly the Capital gain on the sale of immovable property under Section 37 and collection of tax under Section 236 C and 236 K of the Income Tax Ordinance 2001 used to be computed on the value notified by the provincial revenue authorities. Through Finance Act 2016 the powers of Commissioners under section 68 have been withdrawn and valuation is to be made by panel of approved Valuers of State Bank of Pakistan. Similarly the binding nature of the value determined by the provincial revenue authorities for the purpose of collection of the stamp duty has been withdrawn, FBR said.
The FBR said that the business community and various associations of realtors, Federation of Pakistan Chamber of Commerce and Industries and Chambers of Commerce and Industries of all four provinces in their post budgetary review expressed serious concerns and have agitated against this new measure FBR held a number of meetings with them with a view to resolve their genuine problems. As a result of these deliberation it has been decided that instead of valuation to be made by approved Valuers of State Bank of Pakistan the FBR will notify fair market valuation table itself after consultation with all the stakeholders for the purpose of section 37(IA), III, 236-C and 236 K Consequently amendments in Income Tax Ordinance 2001 was introduced through Income Tax (Amendment) Ordinance, 2016.
Pursuant to the issuance of this Ordinance, the withholding tax on sale and purchase of immovable properties shall be collected on FBR notified rates of immovable properties. It is, therefore advised that meetings should be held with the property registration authorities falling under RTOs jurisdiction for making co-ordinated efforts for the collection of withholding tax under Section 236-C and 236-K on the basis of Valuation Table notified by the FBR Chief Commissioners are requested to personally monitor the matter as it involves substantial revenue implications, FBR added.
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