Rs153 billion taxes on immovable property introduced

The FBR has proposed Rs153 billion taxes on immovable property/assets within the country and offshore assets through Finance Bill 2022. The tax on deemed income from an unused property above Rs25 million, including luxury farmhouses, has been proposed. It will fetch Rs30 billion on a per annum basis.

The FBR has increased the Capital Gains Tax on immovable property by non-filers from 2 to 5 percent, which will help it collect Rs40 billion in the next fiscal. The increase in the rate from one percent to two percent on sale and purchase of property for tax-filers will bring an additional revenue of Rs45 billion in the next fiscal starting from July 1, 2022.

The Capital Value Tax at a rate of one percent on foreign immovable properties of Pakistani residents will fetch an additional revenue of Rs8 billion. The Capital Value Tax at a rate of one percent on the liquid foreign assets of Pakistanis will fetch Rs10 billion.

The FBR has also imposed two percent tax on earners of above Rs300 million per annum and this one measure can help it collect Rs38 billion. Builders say the steps taken in the budget 2022-23 will prove to be detrimental for the construction sector as it would not remain attractive for people to invest in the sector.

Former Chairman Association of Builders and Developers (ABAD) Fayyaz Ilyas said that,

previous government was very supportive of the sector and therefore jobs were created. The higher taxation would discourage investments, therefore, he feared 50 percent reduced activity of the sector. Many jobs will be lost because of this.

In the budget 2022-23, advance income tax on the transaction of real-estate has been increased from 1 percent to 2 percent for filers and 5 percent for non-filers. Immovable property worth more than Rs25 million will be taxed at 1 percent of the fair market value or 20 percent of deemed rental income. Personal residence would be exempted from this tax.

Meanwhile, capital gain tax on the property for a holding period of 1 year to be charged at 15 percent. It would reduce to 0 percent after year 6 with gradual decrease of 2.5 percent each year. Previously, it started with 10 percent to zero in four years.