Revenue board documents Rs56 billion real estate transactions in 5 months

KARACHI: The Federal Board of Revenue (FBR) documented Rs56 billion worth of property transactions under the amnesty scheme granted for real estate sector during the past five months and through which it collected Rs1.5 billion in taxes, sources said on Friday. 

The government announced amnesty scheme for whitening the undeclared property investment and under the scheme a buyer needs to pay three percent additional tax on the differential amount between valuation tables issued by FBR and property rates notified by provincial governments. 

Individuals, making property transactions, are exempted from a probe into the source of fund invested through Income Tax (Fourth Amendment) Act, 2016.  The scheme was applicable from December 7, 2016.

The number of such property transactions stood at 40,000, involving Rs56 billion, from December 6, 2016 to April 30. The sources said as the fiscal year is nearing completion people are rushing to document their concealed money. 

In April alone, around Rs20 billion worth of property transactions were whitened. The FBR sources said the amnesty scheme attracted a large number of people. In the first month, only two billion rupees of property transactions were documented. This amount increased to Rs23.3 billion by February-end.

The pace of money whitening is showing the quantum of black money involved in the property sector.  Directorate General of Intelligence and Investigation, Inland Revenue said the incidents of money laundering are mainly identified in real estate sector.

The FBR sources said people are taking advantage of the scheme as there is no avenue of parking ill-gotten money. Tax on immovable property transactions, under withholding tax regime, also posted a phenomenal growth of 106 percent to Rs13 billion during the July-April period of the current fiscal year of 2016/17.

The sharp rise in withholding tax collection was mainly attributed to increase in withholding tax rates during the last budget. Withholding tax rates on sale and purchase of immovable properties increased 100 percent through Finance Act 2016. 

Under the new tax rates on sale of property, a filer seller is liable to pay one percent on the gross amount of transaction and two percent in case of non-filer.  Earlier, these rates were 0.5 percent and one percent for filer and non-filer, respectively. Likewise, the withholding tax rates increased to two percent for filer-buyer and four percent for non-filer from previous one percent and two percent, respectively.