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FBR tightens the noose around under-reported real estate businesses

FBR tightens the noose around under-reported real estate businesses

KARACHI: Federal Board of Revenue is considering forced acquisition of properties where under-reporting against fair market value is detected and exchequer has been deprived of due share of revenue, official sources have said.

The officials said that huge discrepancy was detected in the sale and purchase of properties across the country where immense undeclared money was invested and declared on collector rates, which are much lower than the open market rates.

The FBR may purchase open plots/properties with 10 percent to 20 percent additional value against the reported value of immoveable properties. This will be done on those cases where seller/purchaser had shown much lower value against the open market value.

Recently, the Regional Tax Office (RTO) Karachi had conducted a study on property sale/purchase within the jurisdiction of Defence Housing Authority and Sindh Revenue Authority and detected that actual investment in those properties was around eight percent higher than the amount declared in the sale deed of immovable properties as per the collector’s rate.

The data of transaction of properties in Karachi revealed that the investment declared in 72,800 transactions of immoveable properties during the last three years had shown around Rs 142 billion as per the collector’s rate. Whereas estimated value of investment, considering the fair market, is over Rs 800 billion.

Officials said that an office of the Inland Revenue had suggested FBR to amend the Income Tax Ordinance, 2001 to initiate proceedings for acquisition of immoveable property having sale value of Rs 1 million or above after conducting detailed survey of the open market prices.

FBR officials said that by declaring the collector’s rates, the buyers and sellers concealed money from the tax authorities and deprived the national exchequer of its due revenue.

Inland Revenue office has suggested FBR that after making necessary changes to authorise IR commissioner for initiating proceedings for acquisition of such properties.

FBR has also been suggested to persuade the provinces to withdraw the collector rate for immovable property that are significantly low.

The Inland Revenue office made its argument on the basis of several provisions of the Indian Income Tax Act, 1961 that reduced under-reporting of investment in immoveable properties.

FBR has initiated a campaign against hidden and concealed income and offered several schemes to potential taxpayers to become part of the tax roll.

The officials said that such schemes may not yield fruitful results, as the same in the past had failed. They said that acquisition of properties will help in discouraging the concealment of undeclared income.