The Federal Budget 2023 has brought several changes to the taxation system in Pakistan, including changes to the rental income tax. These changes have significant implications for those who own immovable property other than residential property worth rupees 25 million or more in fair market value.
Under the new rules, if a person owns an immovable property other than residential property worth rupees 25 million or more, 5% of the fair market value of the property will be treated as deemed rental income. A tax of 1% will be charged on this deemed rental income.
For instance, if person A owns an immovable property worth rupees 25 million or more, 5% of this value, i.e., rupees 1,250,000, will be considered as deemed rental income. The rental tax charged on this deemed rental income will be 1% of rupees 1,250,000, i.e., rupees 12,500.
This change in rental income tax will have a significant impact on property owners who have immovable properties worth more than rupees 25 million. The deemed rental income rule will ensure that they are taxed on their property’s fair market value even if they are not renting it out.
It is important to note that this rule only applies to immovable properties other than residential property, such as commercial property, industrial property, or agricultural land. Residential properties are not subject to deemed rental income tax under this rule.
The introduction of deemed rental income tax is aimed at broadening the tax base and increasing tax revenues for the government. By taxing those who own immovable properties worth more than rupees 25 million, the government hopes to increase its revenue streams.
Moreover, this change in rental income tax has been made to bring the tax system in line with the international standards. Many countries have already implemented deemed rental income tax to ensure that property owners pay their fair share of taxes.
In conclusion, the Federal Budget 2023 has introduced significant changes to the rental income tax system in Pakistan. The deemed rental income rule is expected to bring more property owners into the tax net and increase the government’s revenue streams. It is important for property owners to understand this change in tax rules and comply with the new regulations to avoid any penalties or fines.