Section 75A of the Income Tax Ordinance has brought significant changes to the property buying process in Pakistan. As a Pakistani property buyer, it is essential to understand the implications of this section to avoid adverse consequences. In this guide, we will discuss everything you need to know about section 75A and its impact on the property sector in Pakistan.
What is Section 75A of Income Tax Ordinance?
Section 75A of Income Tax Ordinance is a new provision that requires all transactions over a certain value to be made through the banking channel. The limit for immovable property is fair market value up to five million rupees or more, while for any other asset, it’s more than one million rupees. This means that any payment exceeding the specified limit must be made through a bank account.
What are the consequences of non-compliance?
The Federal Board of Revenue has imposed strict consequences for non-compliance with section 75A. These consequences include the disallowance of depreciation expenses for immovable property, initial allowance for plant and machinery, and amortization for intangible assets like software. Additionally, the cost of purchase will be treated as zero, which means the entire value at the time of sale will become taxable.
Why was Section 75A introduced?
The implementation of section 75A is a significant step towards broadening the tax base in Pakistan. Previously, the property sector was one of the most non-compliant areas, as transactions were often made through cash without any record. The implementation of this section will increase transparency in the property sector, allowing the government to monitor and regulate it more efficiently.
How does Section 75A benefit the government and taxpayers?
Moreover, this section will help the government recognize the actual growth of the economy. It will also ensure that taxpayers are contributing their fair share towards the development of the country. By making all payments through the banking channel, taxpayers will have a record of their transactions, which they can use to claim tax credits and other benefits.
What should Pakistani property buyers do to comply with Section 75A?
It is essential for Pakistani property buyers to understand the implications of section 75A to avoid any adverse consequences. The section applies to all transactions, including those between family members, friends, and acquaintances. Therefore, it is crucial to make all payments through the banking channel to ensure compliance.
The implementation of section 75A of the Income Tax Ordinance has brought significant changes to the property buying process in Pakistan. As a Pakistani property buyer, it is important to comply with this section to contribute your fair share towards the development of the country. By making all payments through the banking channel, you can avoid adverse consequences and ensure transparency in the property sector.