ISLAMABAD: The Federal Board of Revenue (FBR) will resolve the issue of double taxation on rental incomes in consultation with all provincial revenue boards and other stakeholders.
Sources told Customs Today that this decision had been made in a high level meeting held recently. Moreover, the decision was made to check the mis-declaration by the landlords who had been following the practice of showing lesser income from the rental properties to avoid taxation.
In this regard, an under consideration proposal is to fix income tax from rental properties at 15 percent with full and final settlement of the tax liability. This proposal is likely to be forwarded to the Finance Division for inclusion in the upcoming budget for the fiscal year 2016-17.
The source said that income tax on rental income was 5 percent which was increased to 10 percent with full and discharge of tax liability. However, it has been abnormally increased in previous two budgets up to 35 percent for the rental income exceeding Rs 4 million per annum. Later this notification was amended last year that it total rental income exceed Rs 6 million then tax to be paid as Rs 1322600 along with 35 percent on the amount exceeding Rs 6 million.
Moreover, 6% tax to be paid on account of sales tax by the Sindh government through SBR thus total amount of tax mounted over to 40 percent which was higher. This situation impacted on taxes (direct and indirect) on rental income increased manifold which led the taxpayers to mis-declaration of their income as well as value of rental properties. Moreover, investors in the real estate sector also felt discouraged.
Furthermore, the landlords increased rents of their properties by 25 percent to 35 percent resultantly the cost of doing business increased and became a burden for leases.
