FBR tightens noose around property investors

KARACHI: The Federal Board of Revenue (FBR) has buckled up to take action against individuals who didn’t file their tax returns despite buying, selling or transferring properties during the last year, officials said on Tuesday. 

The officials said Income Tax Ordinance 2001 bounds three categories of taxpayers to file their returns: those who own immovable property with a land area of 250 square yards or more or a flat located in areas falling within the municipal limits and own immoveable property of 500 square yards or more or a flat having covered area of 2,000 square feet or more.

They said tax authorities are compiling data of sale and purchase of immovable properties during the last year. The exercise would help the tax authorities identify property transactions made during the tax year of 2016 and compare them with the annual returns. “If returns were not filed the tax departments should initiate legal proceedings against individuals,” said an official.

Officials said the decision was made at a meeting, last week, between FBR Chairman Muhammad Irshad, chief commissioners of large taxpayers units and regional tax offices, located in Sindh.  The meeting discussed the Section 236C and 236K of Income Tax Ordinance 2001, which deals with the sale, purchase and transfer of properties.

Sources said the FBR chairman directed the officials to further enhance monitoring of transactions made in cooperative housing societies, Defence Housing Authority and Bahria Town.  Officials said recoveries were made related to property transactions in Bahria Town and notices were also issued in some cases.

Further, the meeting was informed that tax officials had visited various registrar offices for spot checking of transactions to ensure that tax was withheld as per the valuation tables of the FBR.

Sources said the FBR properties valuation is still not reflecting the open market rates. People are also making transactions on collector rates.  Officials told the FBR chief that the tax departments were unable to glean actual statistics of property transactions despite that district registrar offices were digitally connected with the board.

A property buyer has to pay an additional withholding tax rate of four percent besides three percent on a transaction if s/he fails to file returns. Withholding tax on a property transaction is two percent if a buyer is an income tax return filer.

The chairman also directed the tax offices to plug loopholes, related to withholding taxes, in other provisions of the ordinance, including banking cash transactions and non-cash transactions and motor vehicle tax.