IMF diktat: Tax on immovable property likely to be hiked in next budget
Washington-based lender proposes imposing 35% tax on non-filers on purchase of property worth more than Rs100m
May 18, 2024
- Govt may impose 7% tax on non-filers on property up to Rs50m.
- 13% tax suggested for non-filers on buying properties of Rs10-50m.
- IMF asks FBR to tax either pension contributions or benefits.
ISLAMABAD: As Pakistan gears up for talks with the International Monetary Fund (IMF) regarding a new loan programme, the government is likely to increase the tax on the purchase and sale of immovable property in Budget 2024-25 on the Fund's diktat, The News reported on Saturday.
Sources say that the IMF, during its talks with the Federal Board of Revenue (FBR), has asked Islamabad to increase the advance tax on the purchase and sale of immovable property to boost the overall tax revenue.
The development comes as the Washington-based lender's team led by Nathan Porter is set to meet Pakistani authorities to discuss a new bailout programme under the Extended Fund Facility (EFF).
Pakistan has made a formal request for a fresh bailout package of $6-$8 billion under the EFF with the possibility to be augmented through climate finance.
It is to be noted that the IMF, earlier this week, had asked the FBR to repeal discretionary powers of the board and the cabinet to award tax incentives and bring changes in tax laws of NGOs and charitable organisations as well as taxed pensioners.
On pensions, the IMF recommends that either pension contributions or benefits be taxed. To this end, the global lender wants to eliminate the benefit of the deduction of voluntary payments to workers’ participation funds and eliminate the exemption of pensions and tax them by applying one of the alternatives described.
The lender also wants the tax incentives should be limited to cases where their economic benefits, in the form of employment and value addition in the economy, exceed the cost to the budget.
With regards to the prospects of increased tax, the sources added, the government may amend Section 236K of the Income Tax Ordinance in the budget for the next financial year provisioning a tax of 7% for non-filers and 3% for filers is likely to be levied on the purchase of property worth up to Rs50 million.
Meanwhile, a tax of 13% for non-filers and 4% for filers will be levied on property worth Rs10 to Rs50 million.
Furthermore, the Fund has suggested imposing a 35% tax for non-filers and 5% for filers on the purchase of property worth more than Rs100 million to generate more than Rs100 billion in revenue in the next financial year.
It is to be noted that currently, a 3% tax is imposed on filers and 10.5% on non-filers.
Taxes on the sale of immovable property have been increased by amending Section 236C of the Income Tax Ordinance to levy the tax on the sale of immovable property up to Rs 50 million at 12% for non-filers; between Rs50 to Rs100 million at 18% and the tax on the sale of property worth more than Rs100m at 35%.
For filers, the proposed advance tax on the sale of property up to Rs 50 million has been increased by 3%, the tax on the sale of property between Rs50 million to Rs100 million has been increased by 4% and by 5% on the sale of property worth more than Rs.100 million.
