Purchasing property in Pakistan involves various legal and financial considerations, including advance tax on the transaction. This article focuses on Section 236K of the Income Tax Ordinance (ITO) 2001, which dictates the collection of advance tax at the time of property transfer.
Who Pays Advance Tax?
The purchaser or transferee of the property pays the advance tax.
Who Collects Advance Tax?
The person responsible for registering, recording, or attesting the property transfer collects the tax. This includes authorities like local authorities, housing societies, and registrars of properties.
Advance Tax Rates:
- 3%: For filers (individuals who have filed their income tax returns)
- 10.5%: For non-filers
- Overseas Pakistanis: If you purchased the property using a designated foreign currency account, the advance tax serves as your final tax liability.
- Government Schemes: Advance tax may not apply to specific government schemes for expatriate Pakistanis.
- Advance tax is adjustable against your final capital gains tax when you sell the property.
- If you pay advance tax in installments, no further tax is collected at the final transfer.
- Advance tax is only an initial payment. You might have additional tax liabilities depending on your income and other factors.
- Consulting a tax advisor is recommended for personalized guidance and ensuring compliance with all regulations.