LAHORE: In another attempt to shore up tax collection and monitor money trails in the vastly untapped real estate sector, the Federal Board of Revenue (FBR) is taking steps to address the widespread use of cash transactions. Senior FBR officials have revealed their intention to implement strict penalties and improved monitoring measures to ensure compliance with these regulations.
Back in 2019, an amendment, Section 75A, was introduced into the Income Tax Ordinance, 2001. This amendment stipulates that no individual should acquire immovable property with a fair market value exceeding Rs. 5,000,000, or any other asset valued at more than Rs. 1,000,000, except through the use of a crossed cheque issued by a bank, a crossed demand draft, a crossed pay order, or any other crossed banking instrument that substantiates the transfer of funds between bank accounts.
In addition to their earlier information, they also informed that the fair market value of immovable property will be determined either by the Board, as specified in subsection (4) of section 68, or by the provincial authority for stamp duty purposes – whichever amount is higher.
However, if the transaction doesn’t adhere to the specific banking methods outlined earlier, there are significant implications: Firstly, individuals engaging in such transactions won’t be eligible to claim deduction. This means that deductions related to aspects like depreciation, initial allowance, intangibles, and pre-commencement expenditure will not be permitted for assets purchased outside of the specified banking channels.
Secondly, any cash amount used for a purchase that should have been conducted through the prescribed banking channels, as mentioned previously, will not be considered as a cost when calculating any gains resulting from selling such an asset, as per the stipulations of section 76.
Additionally, if someone buys real estate worth more than five million rupees using cash or a bearer cheque, they’ll be subject to a penalty equal to 5% of the property’s value. This value will be determined either by the Board, as specified in subsection (4) of section 68, or by the provincial authority for stamp duty purposes, depending on which one is higher.
The official also explained by giving example that if a person wants to buy a house worth 6 million Rupees. Instead of following the rule in Section 75A, the person decides to pay the seller in cash. In this case, the said person is violating Section 75A because he or she’s purchasing an immovable property worth more than 5 million Rupees using cash, which is not allowed under the law.
The official also added that it’s a common practice for many of us to disregard these rules. This is because there are numerous property dealers involved in buying and selling properties who are neither registered nor fully aware of the laws. On the other hand, there is a prevailing preference among people for cash purchases in real estate, especially for properties that cost less than ten million.
“Discussions have taken place within the board on several occasions regarding the need to penalize those engaging in such transactions. Now, a plan is being implemented in which property transactions in areas notified by the FBR will be closely monitored, and those who violate the rules will face penalties,” he concluded.
FBR producing & selling new manjan everyday. .
With these restrictions the values of the property is being depilated and the sale purchase of the properties will be effected value the properties has already gone down. It is suggested that such strict restrictions should be normalized.
Very Good Step
Jab Govt n Foog khulay aam daka chori karay gay tu why not Awam. Head of state CHOR CORRUPT HAI tu Awam vl also follow their foot steps .
a new oppertunity to collect bribes. let people live heir lives. flat 5% income tax for government to run its business. kaam chore nasal always wants govt job.
Percentage of bureaucrates, munshies and chokidars of cash purchase is the highest. what about those who sell their plots that they get at subsidised rate or even free and sell in millions and mostly in cash. if they get subsidised rate or free they should be taxed double at the time of selling.
FBR should adhere to one policy so that real estate business may also get an encouraging response. Too frequent changes based on abrupt decisions is neither beneficial to the Govt nor to the individuals who are engaged in this business.