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Tax relief expected for the real estate sector!

It may dent its revenues by another Rs15 billion, taking the total relief under consideration for the top five influential businesses to Rs75 billion.

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Withdrawal of the fixed tax for retailers and shopkeepers imposed through electricity bills for a year was welcomed by the Sarhad Chamber of Commerce and Industry (SCCI). Traders were of the view that the government’s business-friendly policies would bring economic stability and flourish trade and economic activities in the country. From this withdrawal, small traders can benefit from this for a period of one year.

After withdrawal of taxes from traders/shop keepers, the government is under pressure and considering withdrawing the 20% deemed income tax imposed on the real estate sector.

It may dent its revenues by another Rs15 billion, taking the total relief under consideration for the top five influential businesses to Rs75 billion.

Read more: Traders’ concerns about the Finance Act 2022

The proposal was being considered after the real estate industry complained about a slowdown in business since July.

New Section 7E has been introduced in the Income Tax Ordinance whereby a resident who derives income equal to 5% of the fair market value of the capital assets situated in Pakistan, will be charged tax at the rate of 20%. The FBR has said that the effective tax rate is 1%.

Prior to the law’s ratification, the government made revisions to the definition of properties liable to the charge, reducing the additional revenue predictions to Rs15 billion.

 

The government was mulling granting Rs60 billion in tax relief to traders, bankers, stock market and transporters last week. With the addition of the real estate sector, the relief might reach Rs75 billion.

Moreover, the government intends to enact the relief measures through a presidential ordinance that will also include taxing measures to “neutralize” the negative revenue impact by increasing the burden on other industries.

Although the levy may not be applicable to many properties, the government is considering withdrawing the deemed income tax.

According to the law, deemed income tax is not applicable to one capital asset owned by a resident person, self-owned business premises from where the business is carried out by the persons appearing on the active taxpayers’ list at any time during the year, self-owned agricultural land where agricultural activity is carried out by the person but excluding farmhouse and annexed land.

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