LAHORE: The revenue department, development authorities and other authorities concerned have resumed the jobs related to transfer of immovable properties across the province after the Federal Board of Revenue (FBR) clarified insertion of sub-section 2(A) in section 236 (C) in the income ordinance and issued new guidelines/criteria in this regard.

“We have resumed operation of the property transfer and registration following the new criteria laid down by the FBR,” said a senior LDA official concerned while talking to Dawn on Tuesday.

Since all the cases related to transfer of properties in the province were put on halt from July 1, the development authorities, including the Lahore Development Authority (LDA), had sought clarification from the FBR in a bid to resume such matters.

The sub-section 2(A) is reproduced as “Not withstanding anything contained in any other law, for the time being in force, any person responsible for registering, recording or attesting transfer of any immovable property shall not register, record or attest transfer unless the seller or transferor has discharged its tax liability under section 7E and evidence to this effect has been furnished to the said person in the prescribed mode, form and matter”.

At this, the authorities had sought clarification from the FBR, questioning whether or not the section 2A is sufficient evidence in context with section 7E.

Following queries received from the department concerned, the FBR, a couple of days before issued clarification, guidelines and criteria for transferring and registering immovable properties (plots, houses, commercial, industrial buildings etc).

The FBR, in its letter, stated that under Section 236-C of the Income Tax Ordinance 2001, any person responsible for registering, recording, or attesting transfer of any immovable property had been designated as the person responsible (hereinafter referred to ‘transferring authority’) to collect advance adjustable income tax from the seller or transferor.

The rate of tax collection is 3pc of the gross amount of the consideration received by the seller or transferor in case of seller/transferor’s name if appearing on the active taxpayers list (ATL) and 6pc in case of non-ATL seller/transferor. Through Finance Act, 2022, Section 7E was introduced whereby, for tax year 2022 and onwards, every resident person has been treated to have derived as income, an amount equal to 5pc of the fair market value of the capital asset situated in Pakistan, subject to exclusions of the capital assets provided under sub-section (2).

The said deemed income is chargeable to tax at the rate of 20pc (effective rate 1pc of fair market value of immoveable property).

“Finance Act 2023 has introduced a new sub-section (2A) in section 236C of the Ordinance which places a bar on the transferring authority for registering, recording or attesting transfer of any immovable property unless the seller or transferor has discharged his tax liability under section 7E of the Ordinance and evidence to this effect has been furnished to the transferring authority in the prescribed mode, form and manner,” it reads.

The FBR also issued various instructions for catering to situations arising out of change in law prescribing mode, form and manner of collection of payment of tax under section 7E. According to new instructions, where the seller or transferor is on the ATL, the said seller or transferor will provide evidence to the transferring authority that he has discharged his liability under section 7E if the seller/transferor has not already paid the tax u/s 7E along with his income tax return filed for TY 2022, then, such person would be required to pay the due amount of tax payable under section 7E of the Ordinance and produce evidence to the transferring authority. For this purpose, a separate payment challan (CPR) has been provided in FBR online payment system. The payment made into government treasury through CPR in this regard will be treated as evidence for the purpose and to the extent of newly inserted sub-section (2A) of section 236C of the Ordinance. If the seller/transferor has already declared the said property in his declaration u/s 7E filed along with his income tax return for tax year 2022 or the said seller/transferor is not required to pay tax u/s 7E due to any stay granted by any court of law or authority, then the seller/transferor will furnish a certificate annexed as Form ‘A’ to this circular duly issued by the Commissioner Inland Revenue holding jurisdiction over the seller/transferor.

The certificate issued by the Commissioner Inland Revenue will be treated as evidence for the purpose and to the extent of newly inserted sub-section (2A) of section 236C of the Ordinance.

In case the seller/transferor doesn’t exist on ATL, then such person is required to pay the due amount of tax payable under section 7E of the Ordinance and provide evidence to the transferring authority. For this purpose, a separate payment challan (CPR) has been provided in FBR online payment system. The payment made into government treasury through CPR in this regard will be treated as evidence for the purpose and to the extent of newly inserted sub-section (2A) of section 236C of the Ordinance.

Published in Dawn, July 27th, 2023