The Government May Revise Tax Plan On Real Estate
The government may revise the tax plan on real estate to generate Rs 8 billion in the next budget. It would be hardly 27% of what can be got by bringing the property of only Islamabad to fair markets.
According to the finance ministry, in collecting additional 4 billion taxes, the government would collect a tax of Rs 20 million from the real estate under a normal tax regime. Currently, the rate of Capital Gain Tax (CGT) is 10% on income above 15 million. If the salaried people’s income ranges from 12 million to 30 million per annual, they should pay 27%.
Similarly, the government is revising the tax plan 2021 on rental income of the property to generate Rs 4 billion. The tax amount from these two is not more than Rs 8 billion in the year 2021-22. This is 27% of government loss due to the unrealistic revision in property in Islamabad.
Tax plan for Islamabad
The local government did not pay any heed in April to the prices of central areas of Islamabad. In January, the Islamabad Capital Administration notified the FBR about the price valuations in Islamabad. However, on April 29, the government twice downward revised the prices that resulted in the erosion of the 6.2 trillion value of these properties. The decrease in the prices of the property would cause about 30 billion losses every year.
The federal government increased the value of the property in July 2019 and brought them to 85% of market prices. The purpose of this increment was to increase the tax collection amount on buying and purchasing of the property according to tax plan on real estate.
The financial action task force(FATF) claimed that the real estate sector is creating black money, which can be used in terror financing activities.
In Islamabad areas, where the FBR has no actions, the district administration has lowered the rates using political influence. The administration revised the prices last year in June when the court asked them to see for amendments.
Read more: Upcoming Budget 2021-22
The prices of lands in ICT were high as there were many projects ongoing, but the local administration maintained it on low valuation. According to the two notifications, the land had the value in hundreds of millions, but they showed it only of having few million prices.
Many prominent real estate areas in Islamabad were excluded and left to ICT administration in the FBR notification of Islamabad property in July 2019, leading to significant revenue loss and tax fraud. The property classified as farmland and rural land in the updated ICT notification can really be used for primary commercial operations such as high-rise residences and plazas, educational institutions, petrol outlets, and marques.
Tax Plan for Zone-II
Property assessment rates in Zone-II of Islamabad, which goes along the Grand Trunk Road, have been lowered by 25 percent to a shocking 82 percent per marla, results in a revenue loss of Rs7 billion per year. The average reduction across the GT route is Rs1 million per marla and Rs20 million per Kanal.
According to a comparison of the two notices, land located along the Islamabad Expressway from Faizabad to Rawat in ICT Zone V shows that the local administration has decreased up to 85% against various categories. This will result in an Rs12 billion revenue loss each year.
Property assessment rates in Zone-II of Islamabad, which goes along the Grand Trunk Road, have been lowered by 25 percent to a shocking 82 percent per marla, results in a revenue loss of Rs7 billion per year. The average reduction across the GT route is Rs1 million per marla and Rs20 million per kanal.
According to a comparison of the two notices, land located along the Islamabad Expressway from Faizabad to Rawat in ICT Zone V shows that the local administration has decreased up to 85% against various categories. This will result in a Rs12 billion revenue loss each year.
The average price reduction per marla is about Rs800,000. According to the sources, premium land in Zone-V has been undervalued by Rs1.84 trillion.
Tax Plan For Zone-IV
The case is similar in Zone IV, where the value of land in all communities along the Murree and Leterhar roads has been greatly decreased without any field study or empirical study. Due to the decrease in land values, approximately Rs11 billion in tax will be lost in Zone IV of the ICT.
According to Islamabad Deputy Commissioner Hamza Shafqat, the property value rates were altered as a result of court decisions and parliament orders, as well as over 300 complaints filed against the January 2020 published prices. He claimed that a committee had been constituted to investigate and that the findings revealed that the rates in January 2020 were excessive. He stated that an internal exercise was performed again, with rates compared to Rawalpindi and then altered with government approval. According to Shafqat, the NA Standing Committee on Interior suggested that prices be decreased, and the administration approved.
The World Bank has also requested that the provincial governments use the FBR rates in return for a $500 million loan. Rather than applying these rates, the ICT administration has sharply cut them, resulting in an Rs30 billion yearly revenue loss.