Property Valuation under the Income Tax Ordinance, 2001
UPDATE FEBRUARY 2019: This article is subject to changes based on FBR Following SRO's
Latest SROs
2 111(I)/2019 Revision of Value of Immovable Properties of Abbottabad 01-02-2019
3 113(I)/2019 Revision of Value of Immovable Properties of Faisalabad 01-02-2019
4 114(I)/2019 Revision of Value of Immovable Properties of Gujranwala 01-02-2019
5 116(I)/2019 Revision of Value of Immovable Properties of Hyderabad 01-02-2019
6 117(I)/2019 Revision of Value of Immovable Properties of Islamabad 01-02-2019
7 119(I)/2019 Revision of Value of Immovable Properties of Jhelum 01-02-2019
8 120(I)/2019 Revision of Value of Immovable Properties of Karachi 01-02-2019
9 121(I)/2019 Revision of Value of Immovable Properties of Lahore 01-02-2019
10 122(I)/2019 Revision of Value of Immovable Properties of Mardan 01-02-2019
11 123(I)/2019 Revision of Value of Immovable Properties of Multan 01-02-2019
12 124(I)/2019 Revision of Value of Immovable Properties of Peshawar 01-02-2019
13 125(I)/2019 Revision of Value of Immovable Properties of Quetta 01-02-2019
14 127(I)/2019 Revision of Value of Immovable Properties of Sahiwal 01-02-2019
15 128(I)/2019 Revision of Value of Immovable Properties of Sargodha 01-02-2019
16 129(I)/2019 Revision of Value of Immovable Properties of Sialkot 01-02-2019
17 130(I)/2019 Revision of Value of Immovable Properties of Sukkur 01-02-2019
18 115(I)/2019 Revision of Value of Immovable Properties of Gujrat 01-02-2019
19 118(I)/2019 Revision of Value of Immovable Properties of Jhang 01-02-2019
20 126(I)/2019 Revision of Value of Immovable Properties of Rawalpindi 01-02-2019
Superceded SROs
Introduction
There are currently several rates of valuation floating in market including the rate specified by district collector/revenue officer, the rate specified by Income Tax Department and the rate specified by valuators authorized by State Bank of Pakistan.
In this blog we will try to elaborate the treatment of valuation of property for the purpose of Income Tax Ordinance, 2001 in detail.
History of property valuation
Till 1986 the gain on sale of immovable property was subject to capital gain tax which later got taxable under the Stamp Duty Act, 1899.
Afterwards, CBR issued several circulars to control the unbridled powers of the Income Tax Officers during 1993 and 1994 and prescribed that circular rates to be adopted via circular 11 of 1993 and circular 11 of 1994;
In 1997 through SRO 550 I / 97 dated 25 July 1997 a new rule 207-8 was introduced to the Income Tax rules, 1982 in which the rates notified by the district collector was applied for the valuation of open plots for the purpose of unexplained assets under section 13 of the repealed Income Tax Ordinance, 1979.
Treatment under the Income Tax Ordinance, 2001
Currently, under the Income Tax Ordinance, 2001 any capital gain arising on the sale of immovable property within 3 years of acquisition is taxable under section 37 according to the prescribed rates.
After the introduction of Income Tax Ordinance, 2001 the taxability of capital gain on sale of immovable property has slightly changed as under:
1) The power to determine the fair market value of the property was specifically given to the Commissioner of the Income Tax under section 68 of the Income Tax Ordinance, 2001;
2) Although, the power to determine the fair market value was specifically given to the Commissioner as mentioned above, however, the board was empowered to make rules for the purpose of section 111 of the Income Tax Ordinance 2001 for the valuation of 'unexplained investment'.
The Board therefore introduced rule 228 of the Income Tax Rules, 2002 laying down the mechanism of valuation of 'open plot' in detail as per the rates specified by the district officer revenue collector of stamp duty.
3) On 19th May 2009, the above mentioned rule was modified by SRO no 392 (I) / 2009 specifying the treatment of 'constructed property' other than open plot to be valued at the higher of fair market value (as per section 68 of the Income Tax Ordinance, 2001) or the DC rate prescribed by the district officer revenue collector.
Complications
By this time the investment in real estate boosted and became the hub for the purpose of evading tax and to park the black money.
This was due to the extreme variations between the DC rates and the fair market value as the prescribed DC rates were not revalued for 5 to 6 years.
Several attempts were made to resolve the issue by giving powers to the Commissioner to determine fair market value of the open plot under section 68 of the Income Tax Ordinance 2001, however, the same was strongly opposed.
Finally, proposal was given that the scheduled banks should be appointed as valuers by the State Bank of Pakistan for the purpose of valuation of immovable property under section 68 of the Income Tax Ordinance, 2001.
In the light of the above discussion the treatment of capital gain on the sale of immovable property under section 37 read with section 68 of the Income Tax Ordinance, 2001 and rule 228 of the Income Tax Rules, 2001 shall be the difference between selling price of the immovable property as prescribed by the Income Tax Department and the cost of the immovable property as prescribed by the DC rate and the same becomes taxable if the property was disposed off within 3 years of its acquisition.
Capital Gain = Selling Price (As per Income Tax Department Rates) - Cost (As per DC rates)
Differentiating between Advance Taxes under sections 236 C and 236 K of the Income Tax Ordinance, 2001
Section 236C of the Income Tax Ordinance, 2001 is applied at the time of sale of the immovable property and shall be collected from the seller at the specified rate.
The tax collected under this section shall be adjustable.
Exceptions for Section 236 C of the Income Tax Ordinance, 2001:
a seller, if the seller is dependent of:
(i) A Shaheed belonging of Pakistan Armed Forces; or
(ii) A person who dies while in the service of the Pakistan Armed Forces or the Federal and Provincial Governments; and
(iii) To the first sale of immovable property which has been acquired or allotted as an original allottee, duly certified by the official allotment authority.]
Whereas, Section 236K of the Income Tax Ordinance 2001 is applied at the time of Purchase of the immovable property and shall be collected from the buyer at the specified rate.
The tax collected under this section shall be adjustable.
Exceptions for Section 236 K of the Income Tax Ordinance, 2001:
Nothing contained in this section shall apply to a scheme introduced by the Federal Government, or Provincial Government or an Authority established under a Federal or Provincial law for expatriate Pakistanis; provided that the mode of payment by the expatriate Pakistanis in the said scheme or schemes shall be in the foreign exchange remitted from outside Pakistan through normal banking channels.
BELOW TABLE IS SUBJECT TO CHANGES AS PER THE SRO'S MENTIONED IN THE BEGINING OF THIS ARTICLE
DHA Multan file prices
ReplyDeleteDHA Multan plots
houses on installments in Lahore
installment homes in Lahore
5 marla houses on easy installments
ReplyDeleteGulberg Greens is a housing society located on Islamabad Expressway. Gulberg Islamabad Offers Gulberg Residencia, Gulberg Commercial, Sports block and Family Parks.
This is a nice blog. Good clean and nice informative blog. I will be coming back soon, Thanks for posting some great ideas
ReplyDeleteclick here
Nice article
ReplyDeleteBut those who want to buy corporate offices visit mall of islamabad
RBS is great property valuation.
ReplyDeleteI read your article this is a good article about Technology Consulting Services and gives us all information. I wish you always give us a lot of information about tax consultant in barking,
ReplyDeletetax consultant in barking
Thank you for such a well written article. It’s full of insightful information and entertaining descriptions. Your point of view is the best among many. Property for sale in France
ReplyDeleteJ7 ICON is being developed by J7 Group in Islamabad on the most prime location, just in close proximity to the new airport, on main Srinagar Highway. Whether you are looking for a luxurious experience of our apartments, branded shops in our lavish mall, or even an excellent opportunity to invest, we have got it all covered for you. With a number of high-rise projects in our timeline, we are inviting you to this secure, life-changing investment opportunity Plots Near New Islamabad Airport .
ReplyDeleteI feel like I’m constantly looking for interesting things to read about a variety of subjects, but I manage to include your blog among my reads every day because you have compelling entries that I look forward to. Here’s hoping there’s a lot more amazing material coming! see here
ReplyDeleteI exactly got what you mean, thanks for posting. And, I am too much happy to find this website on the world of Google. house property survey
ReplyDeleteخیبر سٹی میں5 مرلہ 10 مرلہ 1 کنال سستا ترین پلاٹس خریدنے کے لیے ابھی کال کریں مزید معلومات کے ہمارے یو ٹیوب ویڈیو دیکھیں
ReplyDeleteclick here for watch YouTube video for low price plot khyber city
Nice blog and absolutely outstanding. You can do something much better but i still say this perfect.Keep trying for the best. building survey london
ReplyDeleteThis is a great post. I like this topic.This site has lots of advantage.I found many interesting things from this site. It helps me in many ways.Thanks for posting this again. Builders Services London
ReplyDeleteI have read your blog very carefully. The information you provide is very helpful. I also provide same services. Thanks for sharing this useful blog. tax consultant in barking Here I am sharing with you our services. We are always welcome to serve you here.
ReplyDeleteI liked your blog a lot. You have shared very good information. Hope you keep posting like this. tax consultant in barking Here I am sharing with you our services. We are always welcome to serve you here.
ReplyDeleteExcellent read, Positive site, I have read a few of the articles on your website now, and I really like your style.
ReplyDeleteThanks a million and please keep up the effective work and also get to know about best
Park view City Booking Office Rawalpindi
Thanks for taking to time to discuss this, I feel strongly about it and adore finding out additional on this topic
ReplyDeleteAccounting service in London,
Awesome Blog !
ReplyDeleteCheck Out My info
This housing plan is perhaps the best society in Lahore and ideal for those who need to live in a cutting-edge and upmarket society. Victoria city Lahore payment plan The society offers various a-list offices and it will be all around developed.
I really appreciate this post and I like this very much. I am waiting for new post here and Please keep it up in future
ReplyDeleteSofa and Carpet Cleaning Services in DHA Islamabad
Make your mark in Chiniot's business landscape with our available commercial plots in Din Gardens. Craft a space that reflects your brand's identity and objectives, in a community designed for growth and prosperity. Secure your future in a location that understands the language of success.
ReplyDeleteMithras Consultants specializes in Gratuity Valuation, offering precise insights to guide your financial decisions.
ReplyDelete