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October 24, 2019

FBR issues 13,000 notices to property buyers for returns filing

Business

October 24, 2019

KARACHI: The Federal Board of Revenue (FBR) has issued around 13,000 notices to purchasers of properties across the city, asking them to file returns and explain their sources of income, sources said on Wednesday.

The notices have been issued by Regional Tax Office-II Karachi since the start of the current fiscal year. The tax office obtained information from property registration authority and other housing societies.

Under a section (236K of Income Tax Ordinance, 2001), individuals responsible for registering, recording or attesting transfer of any property are required to collect withholding tax on the amount of transaction. In additional, people are also required to provide information of buyers purchased properties to the FBR.

The action follows a tax amnesty introduced for the real estate sector in which one-time tax is allowed to document the properties.

The sources said notices were sent to the individuals who buy properties and deducted withholding tax but had not filed their income tax returns.

The sources said certain individuals are required to file income tax returns. They own immovable property with a land area of 500 square yards or more or own any flat, immoveable property with a land area of 500 square yards or more, and a flat having covered area of two thousand square feet or more.

The sources said in case the individuals who fail to file income tax returns and are also unable to declare the source of income for the purchase of immovable properties then legal proceedings would be started as per law.

The sources said the real estate is an attractive avenue for undeclared investment. Therefore, in cases where persons failed to declare sources of the amount used for purchase of immovable properties then the amount would be treated as concealed income.

On failure to comply with the FBR notices, such individuals will be liable to penalty for non-filing of income tax returns and concealing taxable money.

The sources said a individual is liable to pay 100 percent additional amount of tax calculated on the undisclosed income.

In case of non-filing of return an additional 50 percent of the calculated tax will be payable on the basis of assessment of persons, who failed to comply with the notices.

The sources said individuals who made transactions in immovable properties after June 30, 2019 are required to declare the amount as per fair market value instead of district collector (DC) values notified by the provinces.

However, they said the withholding tax rate on purchase of properties was lowered to one percent of the fair market value from July 1, 2019 as against previous tax rate of two percent on purchase of immovable property above four million rupees.

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