Federal Board of Revenue (FBR) Issued New Income Tax Circular 03 of 2023-2024 for Enhanced Clarity on Income Tax Circular 01 of 2023-2024 Provisions.
Federal Board of Revenue (FBR) Issued New Income Tax Circular No. 03 of 2023-2024: Clarifications on Property Tax under Pakistan's Income Tax Ordinance 2001
In a recent development, the Federal Board of Revenue (FBR) has issued Income Tax Circular No. 03 of 2023-24, bringing significant changes to the mode and manner of payment of tax under Section 7E of the Income Tax Ordinance, 2001, concerning the sale or transfer of immovable property. These changes have prompted the need for a closer look at the circular No. 01 of 2023-2024 contents and implications for taxpayers and authorities.
Understanding the Background
The circular 03 of 2023-2024 acknowledges the numerous representations received by the Board, reflecting concerns and queries regarding the application of Section 7E of the Income Tax Ordinance, 2001. These representations have highlighted the importance of providing clear guidance to ensure compliance with tax obligations related to the sale or transfer of immovable property.
Modification of Previous Instructions
One of the most critical aspects of the circular is its modification of previous instructions outlined in Circular No. 1 of 2023-24, dated July 21, 2023. It clarifies that certain provisions from the previous Circular No. 01 of 2023-2024 will not apply within the jurisdiction of the Lahore High Court, as per a specific judgment. However, this exemption is subject to the judgment’s status, potentially changing if it is reversed, suspended, or vacated by an Intra Court Appeal or the Honorable Supreme Court of Pakistan.
Change in Tax Year Reference
The Circular No. 03 of 2023-2024 also updates the reference to “tax year 2022,” expanding it to include “Tax Years 2022 and onwards.” This change aligns the circular with evolving tax regulations.
Exemptions from Certain Conditions
The Circular No. 03 of 2023-2024 introduces exemptions from specific conditions related to evidence submission for certain categories of individuals or properties. Non-resident individuals, including non-resident Pakistanis, are no longer required to pay tax under Section 7E of the Income Tax Ordinance, 2001. Instead, they must provide specific documentation, including Form-B (as difined in Circular No. 03 of 2023-2024) and passport copies.
Furthermore, individuals related to the Pakistan Armed Forces and government services receive exemptions from evidence submission requirements. This exemption also extends to properties allotted to Shaheed or dependents of a Shaheed, individuals who die in government service, and war-wounded individuals.
Farmhouses and Agriculture Property
The Circular No. 03 of 2023-2024 distinguishes between self-owned agriculture properties used solely for agricultural purposes and properties with farmhouses. Self-owned agriculture properties not used for non-agricultural purposes are exempt from Section 7E of the Income Tax Ordinance, 2001. However, when farmhouses are present on agriculture properties, regular rules apply.
Exemption for Certain Entities
Intriguingly, the Circular No. 03 of 2023-2024 outlines that Section 7E of Income Tax Ordinance, 2001 does not apply to immovable property owned by local authorities, development authorities, and builders and developers for land development and construction. To qualify for this exemption, these entities must be registered with the Directorate General of Designated Non-Financial Business and Professions (DNFBP). Specific certificates and documents are required for this exemption to be valid.
Validity and Future Automation
The Circular No. 03 of 2023-2024 emphasizes that it will be valid until an automated system is developed for this purpose. This underlines the importance of staying updated with future developments in taxation procedures.
Conclusion
In conclusion, Circular No. 03 of 2023-24 brings several significant changes and clarifications to property tax under Pakistan’s Income Tax Ordinance, 2001. These changes aim to streamline the process for taxpayers and authorities, ensuring compliance with tax obligations. It is crucial for individuals involved in property transactions to stay informed and adhere to the guidelines provided in this Circular No. 03 of 2023-2024 to avoid potential issues in the future. For the latest updates on tax regulations and compliance, stay tuned to reliable sources and official government announcements.
Check : Circular No. 03 of 2023-2024
Partial Modification to the Instructions Regarding Mode and Manner for Payment of Tax under section 7E of the Income Tax Ordinance, 2001 on Sale or Transfer of Immovable Property
This circular, issued by the Government of Pakistan’s Federal Board of Revenue, provides guidance and clarifications related to the Income Tax Ordinance of 2001, specifically regarding the payment of tax under section 7E for the sale or transfer of immovable property. Here are the key points from the circular:
Background: The circular acknowledges that the Board has received numerous representations regarding the mode and manner of furnishing evidence for the application of section 7E of the Income Tax Ordinance, 2001, concerning the sale or transfer of immovable property.
Modification of Previous Instructions: The circular partially modifies and adds to the instructions provided in Circular No.1 of 2023-24, dated July 21, 2023. It clarifies that certain provisions will not apply in cases falling under the jurisdiction of the Lahore High Court, as per a specific judgment, unless that judgment is overturned or altered by an Intra Court Appeal or the Supreme Court of Pakistan.
Change in Tax Year Reference: The circular updates the reference to “tax year 2022” to include “Tax Years 2022 and onwards.”
Exemptions from Certain Conditions: The circular provides exemptions from certain conditions related to evidence submission for specific categories of individuals or properties:
Non-resident individuals, including non-resident Pakistanis, are not required to pay tax under section 7E, but they must submit specific documentation.
Certain individuals related to the Pakistan Armed Forces and government services are exempt from evidence submission requirements.
Properties for which tax under section 236K has been paid in the first year of acquisition are also exempt from tax under section 7E.
Farmhouses and Agriculture Property: It specifies that self-owned agriculture properties not used for non-agricultural purposes are exempt from section 7E. However, if there are farmhouses on the agriculture property, the regular rules apply.
Exemption for Certain Entities: Section 7E does not apply to immovable property owned by local authorities, development authorities, and builders and developers for land development and construction, provided they are registered with the Directorate General of Designated Non-Financial Business and Professions (DNFBP). Specific certificates and documents are required for exemption.
Validity and Future Automation: The circular states that it is valid until an automated system is developed for this purpose.
Legal Precedence: It emphasizes that in case of any conflict between the circular and the actual law, the law prevails.
This circular provides detailed instructions for various scenarios related to the sale or transfer of immovable property and the associated tax obligations in Pakistan. It aims to clarify and streamline the process for taxpayers and authorities.
“The income tax system is a complicated mathematical game.”
– John Milius
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