Karachi: The Federal Board of Revenue (FBR) Regional Tax Office (RTO)-II has notified over 13,000 property buyers all across the city, urging them to file their returns and reveal their sources of income, according to news sources.
The RTO-II have been issuing notices since the beginning of the tax year (2019-20), based on the information obtained from the property registration authority and various housing societies.
Under Section 236-K of the Income Tax Ordinance 2001, the individuals who are liable to register, record or attest any property transfer are to collect withholding tax on the transaction amount. Additionally, these people are also under legal obligation to offer information on property buyers to the FBR.
The notices have been sent to the people who bought properties and deducted withholding tax, yet haven’t filed income tax returns. As per the sources, any individual owning immovable property encompassing an area over 500 sq yds or more, or a flat with a covered area of 2,000 sq ft or more, is required to file income tax returns. The tax authorities can take legal action against the violators that fail to submit the returns and reveal their source of income.
The FBR launched this crackdown after the introduction of a real estate tax amnesty scheme that allows the one-time tax to document the properties.
Official sources are taking into account the fact that in the past, real estate has been an attractive avenue for undeclared investment. Therefore, in cases where people haven’t declared the source of their income when purchasing immovable properties, action can be taken against them for concealing taxable money and failing to file their tax returns. Any such individual will have to pay 100% additional amount of tax calculated on disclosed income, and 50% additional tax for non-filing.
The department has also declared that individuals who purchased immovable properties after June 30, 2019, will have to declare the amount as per fair market value instead of DC (district collector) values as notified by provinces.
Additionally, it should also be noted that the withholding tax for properties has been reduced by 1% of the fair market value from July 1, 2019.