ISLAMABAD: Federal Board of Revenue (FBR) has collected Rs24 billion as withholding tax on purchase of immovable properties during tax year 2020.
According to collection statistics for tax year 2020 released by the FBR on Tuesday revealed the withholding tax collection on purchase of immovable properties increased to Rs24 billion as compared with Rs13.50 billion in the preceding fiscal year, showing an increase of 78 percent.
The collection of withholding tax on purchase of immovable properties is made under Section 236K of the Income Tax Ordinance, 2001.
Prior to Finance Act, 2019, the withholding tax rate was at zero percent where value of immovable property was up to Rs4 million. While, withholding tax at two percent for income tax return filer was to be collected where the value of immovable property is more than Rs4 million. However, at this value of immovable properties the withholding tax for non-filers was prescribed at 4 percent.
However, through Finance Act, 2019 the withholding tax rate was amended to one percent on fair market value of the immovable properties purchased during tax year 2020 and onwards in case the purchase is on the Active Taxpayers List (ATL).
The rate of withholding tax in case person is not on the ATL is 2 percent.
The withholding tax was imposed on purchase of immovable properties under Section 236K was introduced through Finance Act, 2014 in order to encourage income tax return filing.
According to the Section 236K of Income Tax Ordinance, 2001, any person responsible for registering, recording or attesting transfer of any immovable property shall collect withholding tax at the time of registering, recording or attesting the transfer shall collect from the purchaser or transferee.
It further said that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society and registrar of properties.