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Aftab Maken
The Federal Board of Revenue (FBR) said it categorically in meeting of the finance committee that it would block undisclosed incomes and assets.
Chairman FBR, Rashid Langrial, further said that only 2.5% of individuals will be affected by the Tax Laws Amendment Bill, and investors in the property sector will be required to disclose their sources of income.
The meeting, chaired by Bilal Azhar Kiani, took place in Islamabad, focusing on the issue of imposing restrictions on property purchases by ineligible tax filers. Bilal Azhar Kiani questioned why eligibility criteria for wealth statements were included in property purchases, urging the definition of tax filer eligibility in the bill to be clarified.
He expressed concerns over the draft of the Tax Laws Amendment Bill, calling it dangerous and potentially restrictive for the property sector. Prominent real estate figure Arif Habib highlighted that the real estate sector significantly contributes to the economy and pays 115% in taxes. He warned that the proposed law could halt investments in the sector.
The committee also discussed making it mandatory to declare additional income or funds in tax returns for property purchases. Rashid Langrial emphasized the decision to curb undisclosed incomes and assets, explaining that individuals will be prohibited from purchasing properties worth over Rs 10 million without declaring the source of income in their tax returns.
He noted that 97% of property transactions in the country involve properties valued under Rs 10 million, targeting only the top 2.5% of transactions. To facilitate this, the FBR is developing an app to display tax return data for property buyers.
Langrial also highlighted the widespread under-valuation of properties in Pakistan, stating that a declared income of Rs 13 million would be required to purchase a plot. Children under 25 years of age can buy property based on their parents’ tax returns.
He revealed that undisclosed wealth primarily flows into the real estate sector, citing over 1.695 million property transactions in the fiscal year 2023-2024, with 93.7% of transactions valued below Rs 5 million. On the other hand, only 12 individuals in Pakistan have declared assets exceeding Rs 10 billion.
Chairman of the Association of Builders and Developers (ABAD), North, SM Nabeel, proposed immediate registration for property buyers and sellers, cautioning that restricting real estate investments would negatively impact the sector.
Arif Habib suggested that investments of up to Rs 50 million in the property sector should be exempt from scrutiny for one year, as it would lead to substantial registrations and boost investments. He reiterated concerns that the Tax Laws Amendment Bill could severely restrict real estate development.
Habib also noted that significant investments have shifted from Pakistan to Dubai, criticizing the government’s handling of this capital flight. He emphasized that tax filer information should only be required during property registration.
ABAD Chairman Hassan Bakhshi criticized the FBR’s outdated data, highlighting that property values have increased due to new valuations. He argued that the amendment would impact 60% of individuals, contrary to the FBR’s claim of 2.5%, asserting that the property sector does not operate on black money and primarily uses banking transactions.
Langrial clarified that online declarations could be submitted under the bill, with the FBR preparing an app for this purpose, allowing declarations to be made an hour before property transactions.
He stressed the need to prevent investments of untaxed income in the real estate sector, which has been a common practice, with bank transactions often involving undeclared funds. He further revealed that only 12 individuals in Pakistan have declared assets exceeding Rs 10 billion.
The sub-committee sought further clarification from the FBR on the law restricting property purchases by ineligible tax filers.
