New tax rates imposed on real estate transactions in Punjab Pakistan

 by web desk

New tax rates imposed on real estate transactions in Punjab, Pakistan

New tax rates have been introduced for the sale and purchase of real estate in Punjab as the Punjab Land Authority (PLRA) has issued a directive to all revenue officers to enforce tax collection from both buyers and sellers based on the revised tax rates.

The PLRA's move comes in response to changes introduced by the Finance Act, 2023, which include adjustments to income tax rates and related provisions of sections 236C and 236K of the Income Tax Ordinance, 2001.

Under the previous tax regime, individuals involved in real estate transactions were subject to tax rates of 2 percent for registrants and 4 percent for non-registrants under section 236C. However, the revised rates now set a sales, transfer and disposal tax rate of 3 per cent for registrants and 6 per cent for non-registrants.

Section 236K, which refers to real estate purchases, was similarly amended. Previously, users who signed up had to pay 3 percent in taxes, while those who didn't sign up were taxed at a rate of 7 percent. Under the new provisions, tax rates remain at 3 percent for those who register, but those who are not registered are now subject to a higher tax rate of 10.5 percent for property purchases.

The changes came into effect on July 1, 2023 and aim to streamline the taxation process related to real estate transactions. However, failure to comply with the revised tax rates and provisions could lead to legal consequences as the Federal Board of Revenue (FBR) is empowered to recover any irregularities found on inspection by the transferring authorities.

A Punjab Revenue official informed this scribe that the aim of these adjustments is to bring the tax rates in line with the current economic realities while ensuring that revenue collection remains efficient and fair.

“These changes underline the government's ongoing efforts to increase revenue generation and ensure a fair tax system in the real estate sector. The new tax rates will play a key role in shaping real estate transactions across Punjab and are expected to have a significant impact on the local real estate market.