Transfer of immovable property: CVT may be raised to 8% for buyers without tax number

[Naveed Yaseen]

SOHAIL SARFRAZ
ISLAMABAD (November 19 2009): The doubling of capital value tax (CVT) on transfer of immovable property from 4 percent to 8 percent for buyers having no National Tax Number (NTN), and enhancement of withholding tax on cash withdrawal from banks may be the two major short-term measures to generate additional revenue.

Sources told Business Recorder here on Wednesday that the proposals were discussed during the last meeting of Tax Advisory Council at the Federal Board of Revenue (FBR) to generate additional revenue through effective measures. The private sector in the meeting supported these proposals, and if these proposals are implemented, the FBR would be in a position to generate additional revenue during 2009-10.

According to sources, these proposals are under consideration of the FBR, but nothing has been finalised in this regard. The FBR has to generate additional revenue of Rs 16 billion for meeting the enhanced revenue collection target of Rs 1,396 billion for the current fiscal year.

The first proposal is to enhance the rate of CVT on transfer of immovable property by those carrying out transactions without valid NTN. It has been estimated that the FBR may generate around Rs 5 billion from enhancement of CVT from 4 percent to 8 percent for buyers of property having no NTN.

Presently, 4 percent CVT is applicable on transfer of immovable property. However, if the proposal is considered by the government, it would only be applicable for persons operating without NTN. The second proposal is to enhance the rate of withholding tax on cash withdrawal from banks.

The idea is to increase withholding tax from 0.3 percent to a reasonable level for enhancing revenue collection during 2009-10. Presently, where cash amount withdrawn exceeds Rs 25,000, tax is required to be deducted on the whole amount, and not the amount exceeding Rs 25,000. The rate of withholding tax under section 231-A was enhanced from 0.2 percent to 0.3 percent, through Finance Act, 2008.

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