ByLahore, Pakistan: The Punjab government has taken a stern stance against property transactions conducted through non-banking channels. A recent directive from the Board of Revenue mandates the collection of a 5% penalty on all property purchases exceeding Rs. 5 million made through non-banking channels.
Enforcement Mechanism:
The penalty will be applicable under Section 75A of the Income Tax Ordinance, 2001, and will be collected by relevant authorities such as Sub-Registrars, Assistant Directors of Land Records, and Transferring Officers. These officials will act as withholding agents and are responsible for ensuring the collection of the penalty.
75A. Purchase of assets through banking channel.- (1) Notwithstanding anything contained in any other law, for the time being in force, no person shall purchase-
(a) immovable property having fair market value greater than five million Rupees; or
(b) any other asset having fair market value more than one million Rupees, otherwise than by a crossed cheque drawn on a bank or through crossed demand draft or crossed pay order or any other crossed banking instrument showing transfer of amount from one bank account to another bank account.
Rationale Behind the Move:
This measure aims to curb tax evasion and encourage transparency in property transactions. By discouraging non-banking channels, the government intends to bring more transactions into the formal financial system, thereby increasing tax revenue.
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Don’t Buy Property on Cash: A Guide for Pakistani Property Buyers
Concerns and Challenges:
- Implementation: Effective implementation of this measure will be crucial. Ensuring that all relevant authorities are aware of and adhere to the new directives will be a key challenge.
- Impact on Property Market: The imposition of a 5% penalty could potentially impact property transactions, particularly in the lower and middle-income segments.
- Public Awareness: Adequate public awareness campaigns are necessary to inform citizens about the new regulations and ensure compliance.
The Punjab government’s decision to impose a penalty on non-banking property transactions is a significant step towards improving tax compliance and bringing more transactions into the formal economy. While challenges remain in implementing this measure effectively, it is crucial to ensure a fair and transparent implementation process to avoid unintended consequences for the property market.
