ISLAMABAD: The Federal Board of Revenue (FBR) has explained changes brought in tax on property income through Finance Act, 2021.
The FBR said that the block taxation for property income available to non-corporate entities has been done away with.
Following changes governing taxation of income chargeable to tax under the head income from property have been introduced;
- Property income of companies was taxable as normally computable income. However, in case of individuals and AOPs there was an option for property income to be taxed on gross rental bases. This distinction has been withdrawn and now property income shall be chargeable to tax under the head income from property under normal tax regime after admissible deductions. Necessary changes have been introduced in sections 15 and 15A of the Income Tax Ordinance, 2001. Subsequently, Division VIA of Part I of First Schedule has been omitted.
- Current year’s loss under any head of income has been allowed to be set off against the person’s income chargeable to tax under the head “income from property” by amending section 56 of the Ordinance.
- Withholding tax regime dealing with rental income from immoveable properties has been rationalized. The ambiguity regarding withholding of tax on rental income of immoveable property of sub-lessee has been removed. It has been explained that all persons making payment on account of immoveable property are required to withhold tax at the prescribed rates which have also been rationalized in Division V of Part III of First schedule.
