A new section has been introduced to the income tax ordinance, 2001. According to this, a tax rate of 20% has been imposed on the income from immovable properties or Real Estate properties.
The government announced a new federal budget in which they imposed a new tax on everyone who has more than one immovable property. In this regard, a person with more than one immovable property worth more than 25 million will be charged 5% of the rental value income compared to the fair market value.
There’s another new section 7E has been introduced in the Income Tax Ordinance, 2001 through this current finance bill which is explained below:
· 7E. Tax on deemed income. – Notwithstanding anything contained in the Ordinance, for the tax year 2022 and onwards, a tax shall be imposed at the rates specified in Division VIIIC of Part-I of the First Schedule, on the income specified in this section.
· A resident person shall be treated to have received rent equal to five percent of the fair market value of an immovable property situated in Pakistan whether such property has been rented out for any consideration or not.
· Whereas this new included section does not apply to the following individuals
1. One self-owned immovable property
2. Self-owned business premises from which business is carried out
3. Self-owned agriculture land where agriculture activity is carried out by a person but does not include farmhouse and land annexed thereto.
4. Where the fair market value of the property or properties, in aggregate, excluding properties mentioned in clauses (1), (2), and (3) does not exceed twenty-five million Rupees.
5. A Provincial Government, a Local Government, a local authority, or a development authority
6. Land development and construction projects of builders and developers registered with the Directorate General of Designated Non-Financial Businesses and Professions of Board
7. A property that is subject to tax under section 15 of the Ordinance and the tax chargeable is more than tax chargeable under this section.
· If the tax chargeable under section 15 is less than the tax amount chargeable under this section then the excess tax amount chargeable under section 15 will be paid under this new section.
· The federal government has the right to include or exclude any person or property under this section
· According to the finance bill, in 2022 the rate of tax under section 7E will be 20%.