FBR updates withholding tax rates on sale, purchase of immovable properties

 FBR has issued a withholding tax card 2020-2021 (renewed until June 30, 2020) including an amendment to the Income tax Ordinance, 2001 by the Finance Act, 2020.


Under section 236C of the Income tax Ordinance, the 2001 reserve tax must be collected from the seller of immovable property.


Everyone who registers, records or certifies or transfers including property managers, real estate managers, community co-operatives and registrars or properties must collect taxes from the seller of immovable property at the time of registration, recording or proof of transport.


The tax rate will be one percent of the total value of the consideration received. If a person does not appear in the active taxpayer list (ATL) the tax rate will be two percent of the total value of the consideration received.


Withholding tax will be lower when the property is acquired and disposed of within the same year; otherwise the tax will be changed.


Advance Taxes, under this section, are not collected if immovable property is held for more than four years.


Under section 236K of the Income tax Ordinance, 2001 withholding tax will be collected from the buyer of immovable property.


Under section 236K (1) every person who registers, records or certifies or transfers including local authorities, real estate agents, community members, registrars or real estate agents shall issue / collect tax on the buyer of immovable property at the time of registration, recording or proof of transfer.


The amount withheld tax shall be one percent of the fair market value. In the event of a person not being in ATL the tax rate will be 2% of the fair market value.


The withholding tax will be adjusted in view of the tax liability payable.


Section 236K (3) of the Ordinance deals with a pre-payment tax in respect of the purchase of immovable property in which the transfer is to be made after payment of all installments.


Any person responsible for the collection of the installment must deduct / collect from the buyer a share of the immovable property at the time of payment of the installment.


The tax rate will be one percent of the correct market value. In the event of a person not being at ATL the tax will be 2% of the fair market value.


The tax will be adjusted in accordance with the full tax liability.


Source: https://pkrevenue.com/fbr-updates-withholding-tax-rates-on-sale-purchase-of-immovable-properties/

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