ISLAMABAD: The collection of withholding tax on purchase of immovable properties fell by 12 percent owing to fall in prices after slowdown in economy and enforcement of legal provisions by Federal Board of Revenue (FBR).
According to sources, the collection of the tax office fell to Rs390 million during first eight months (July-February) of current fiscal year as compared with Rs443 million in the same period of the last fiscal year.
The sources said that slowdown in economy had restrained people from purchasing or transfer immovable properties. Further the enforcing legal provision related to curb black money also prevented investment in the real estate business, they added.
The sources said besides these issues the ongoing hearing related to illegal constructions in Karachi city at the level of Supreme Court of Pakistan also impacted the purchase of immovable properties.
They said that the decline in collection of withholding income tax was also due to deteriorating in open market prices due to fear of action against black money. It is reported that the real estate business in Pakistan is one of the biggest avenue for the black money.
The withholding tax on purchase of immovable property is one percent of the declared value on the basis of FBR valuation table. However, the tax rate is two percent if the buyer is not on the active taxpayers list (ATL).
However, changes in the law enable the tax authorities to examine the declared value by a purchaser and on non-satisfaction the tax authorities may assess the property on fair market value.
The sources said that the real estate business was also afraid as tax authorities had started obtaining information from bank regarding payment for the purchase of immovable properties.
Besides, the tax authorities are also obtaining information of buyers of immovable properties from provincial property registrars on real-time basis.
The sources said that the tax machinery was finalized strategy to take harsh action against black money invested in real estate business in the wake of significant shortfall in revenue collection.