ISLAMABAD: Another stage of shifting power of valuing property prices from the State Bank of Pakistan to Federal Board of Revenue (FBR) has completed.
The Senate Standing Committee on Finance has approved an amendment to Income Tax Bill 2016 to shift the said power from the SBP to the FBR.
FBR Chairman Nisar Muhammad Khan presented the amendment to the Senate committee by and sought to empower the revenue authority to value property prices. However, the committee forwarded the amendment to the Senate after proposing a few changes. If approved, the amendment will be forwarded to the National Assembly.
According to Committee Chairman Senator Saleem Mandviwalla, the amendment in the law has to be that the FBR will not have the powers to value every property deal and the change in property price will also not be as deemed fit by the FBR.
The committee also recommended an annual evaluation of properties in 21 districts and proposed establishment of a committee or a board headed by the FBR Chairman with representation from parliamentarians, technical experts as well as people from civil society for evaluation of properties for the taxation purpose.
Someone may challenge the law in court, said Fateh Muhammad Hassani while Mohsin Aziz stated that “undocumented economy is real issue but the proposed measure would increase tax collection and not document the real estate sector.”
The meeting was informed that prior to the Finance Act 2016, fair market value for the purpose of investigating the source of investment in acquisition of immovable properties was determined by the Commissioner. However, under the Income Tax Rules fair market value was to be determined at a value fixed for the purpose of collecting stamp duty by the Provincial revenue authorities and it was binding upon the Commissioner Inland Revenue.
Similarly, the Capital Gain Tax on the sale of immovable properties under Section 37 and collection of tax under Sections 236 C and 236 K of the Income Tax Ordinance, 2001 used to be computed on the value notified by the provincial revenue authorities. Through the Finance Act 2016, the powers of Commissioners under section 68 have been withdrawn and valuation is to be carried out by a panel of approved valuers of State Bank of Pakistan. Similarly, the binding nature of the value determined by the Provincial revenue authorities for the purpose of collection of the stamp duty has been withdrawn.
It was agreed that instead of valuation to be made by approved valuers of State Bank of Pakistan, the FBR will notify a fair market valuation table itself after consultation with all the stakeholders for the purpose of Section 37(1A), 111, 236-C and 236-K of the Income Tax Ordinance, 2001. Consequently amendments in Income Tax Ordinance, 2001 were introduced through Income Tax (Amendment) Ordinance, 2016 wherein the FBR was empowered to issue SROs notifying the fair market value of immovable properties in 21 major cities of the country.
The holding period of property for the purpose of Capital Gain Tax has also been reduced from five to three years and rates have also been rationalised according to the holding period. The meeting was also informed that prior to the Finance Act 2016, input tax adjustment of sales tax paid on services to provincial revenue authorities was admissible against output tax liability under the Sales Tax Act, 1990.
