ISLAMABAD, April 10: The government is likely to approve a proposal seeking to extend zakat deduction on real estate assets and the overhaul of the zakat distribution system in order to generate additional funds for poverty alleviation programmes.

A senior official told Dawn on Tuesday that the federal cabinet would review a special report on Wednesday that proposes these measures.

Currently, ‘nisab’ or the minimum amount for zakat deduction is on a deposit of Rs8500 but since real estate assets have a much higher value, they were exempted from zakat by the government.

According to an official, a committee formed by the cabinet has proposed a range of measures for improving the zakat collection and distribution system.

Under the Wealth Tax Act, 1969, the government had raised revenue of more than Rs5 billion annually on property assets before it was annulled in 2002. Under the Zakat and Ushar Ordinance, 1980, zakat was exempted from property due to collection from it through the wealth tax. Previously, zakat was limited only to savings accounts. The rate of zakat and wealth tax was also the same, which stood at 2.5 per cent.

Due to this anomaly it was proposed to bring real estate under the net of zakat since there was no more wealth tax, the official said.

Statistics showed that the annual zakat collection stood at about Rs4 billion and zakat disbursement for five years had been at more than Rs9 billion per annum. The additional money was funded through the accumulated balance of zakat which was at Rs22 billion in 2000. The official said the accumulated balance was now almost depleted and if immediate steps were not taken, zakat disbursement would have to be curtailed.

The meeting was also expected to give approval to reservation of 10 percent quota for employment of women in government services, the Pakistan Health Research Council Bill 2007 and other issues.