FBR considering 35 percent capital gain tax on property deals

[Naveed Yaseen]

ISLAMABAD (June 07 2008): Following extension in capital gains tax (CGT) exemption on stock exchanges till 2010, the Federal Board of Revenue is exploring another possibility to impose 30-35 percent tax on purchase/sale of property within a period of three years in coming budget.

Sources told Business Recorder on Friday that the FBR would also take some major steps to broaden the tax-base in budget (2008-09) to ensure filing of income tax returns by owners of private hospitals, commercial plazas/buildings and doctors working in hospitals or doing private practice, tenants and shop owners.

These categories of persons are not exempted from filing of income tax returns. However, the actual problem is in the real estate sector where property owners are not filing income tax returns. According to sources, a new proposal is under consideration to tax property where purchase and sale takes place within three years period. However, the exact amount of the levy has yet not been finalised, but it could be ranging between 30-35 percent of the value of transaction.

Sources said that the FBR wanted to strictly enforce Income Tax Ordinance 2001 so that all owners of private hospitals, commercial plazas, and commercial buildings file their income tax return and declare their income according to their actual rental income. Similarly, filing of income tax return by doctors working in hospitals or doing private practice, tenants and shop owners would be ensured in the upcoming budget.

Under section 114 of the Income Tax Ordinance 2001, following persons are required to furnish a return of income for a tax year: Every company; every person (other than a company) whose taxable income for the year exceeds the maximum amount that is not chargeable to tax; any non-profit organisation; any welfare institution that owns immovable property with a land area of 250 square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of local government laws in the provinces; or areas in a cantonment; or the Islamabad Capital Territory. Every non-profit organisation including those established for religious, educational, charitable, welfare or development purposes and for the promotion of amateur sports are liable to file income tax returns.

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