ISLAMABAD: Documenting real estate transactions

FBR introduces IT-5 form for immovable property sellers

* Buyers, sellers will be required to pay

* 0.5 percent WHT on sale of immovable property

By Sajid Chaudhry (Daily Times)

The Federal Board of Revenue (FBR) has made it mandatory for the sellers of immovable property including plots, flats, buildings, agricultural land, etc, to ensure submission of income tax (IT) -5 return form to provincial registration authorities along with the registration documents upon sale or transfer of the immovable property.

The tax authorities on Thursday notified IT-5 form – an application form to the registering and transferring authorities of the provincial governments as well as federal capital administration for sale or transfer of immovable property.

The sellers and buyers would be required to pay 0.5 percent withholding tax (WHT) on immovable property u/s 236 of the Income Tax Ordinance 2001 to the property registration authorities and get a Computerized Payment Receipt issued by the National Bank of Pakistan or the State Bank of Pakistan.

The FBR has introduced a new form IT-5 for sellers of property. It is an application to the registering and transferring authority for sale or transfer of immovable property, wherein the seller of property shall pay 0.5 percent WHT under the newly introduced Section 236C of the Income Tax Ordinance, 2001, which is sort of advance income tax on sale or transfer of immovable property.

Official sources said that the move appears to be a strong documentation measure at the part of FBR to collect data from most undocumented sectors for which certain particulars have been sought from the buyer and seller of the immovable property. At the time of sale or purchase transaction of immovable property, following particulars shall be filed by both ends (buyer and seller): name of seller or owner, CNIC, NTN, PP of seller, name of buyer, CNIC, NTN, PP of buyer, location and particulars of property such as whether it is commercial, residential or agricultural and status of property like, building, flat, plot or land, value of property and tax computation, like, date of purchase of property and date of sale or transfer. Sale price and whether sold within a period of two years from the date of purchase, WHT calculation, etc.

The registering or transferring authority would have to make four copies of the IT-5 form. The original copy would be retained by the registering or transferring authority and the remaining three copies be distributed among sellers, buyers and concerned Regional Tax Office (RTO) of the FBR. The last copy to the RTO would enable the FBR to know about the property transaction for the imposition of CGT on the immovable property.

The registering or transferring authorities would have to ensure that WHT u/s 236 of the Income Tax Ordinance 2001 has been paid by the sellers and one copy has been sent to the Regional Tax Office concerned.

Through Finance Act, 2012, CGT on immovable property has been introduced for the first time, which definitely works as an additional revenue generating measure. The gain on sale of such property within two years of acquisition shall be taxed in the laid down manner: Where the holding period of immovable property is up to one year, the rate of tax would be 10 percent and where the holding period of property is more than one year but less than two years, the rate of tax would be 5.0 percent.

By virtue of this amendment through Finance Act, 2012, gain on sale of immovable property becomes taxable under the head capital gain however immovable properties sold beyond holding period of two years would bear the character of capital assets but are not taxable.

Similarly, another withholding tax provision has also been introduced through Finance Act, 2012, like, Section 236C of the Income Tax Ordinance, 2001. As per newly introduced provisions of the law, any person responsible for registering or attesting transfer of any immovable property shall at the time of registering or attesting the transfer collect from the seller or transferor advance tax at the rate specified in Division X of Part IV of the First Schedule.

There are certain exclusions provided under the law, the advance tax collected under Section 236C shall be adjustable, however, advance tax under Section 236C shall not be collected in case of federal government, provincial government or a local government, sources added.

One Comment

  1. M.A.Khan

    I wanted to know that under section 2361 or Income Tax Ordinance 2001 withholding tax of 5 % on student fee is to be paid by the student if fee exceed to Rs.200000/= as the private schools have sent notice to the parents for charging the same from students with fee.

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