New Penalty imposed on property deals via non-banking channels

ISLAMABAD: Pakistani authorities have introduced a 5% penalty on property transactions exceeding Rs 5 million conducted through non-banking channels as part of stricter regulations.

The development has raised concerns among property buyers and sellers as those transacting through non-banking channels will now face new taxes. This follows recent moves by the Federal Board of Revenue (FBR) to increase property sales tax and revise property prices.

The new penalty is being imposed on purchases of property worth more than Rs 5 million under the Income Tax Ordinance of 2001, or on any other assets worth more than Rs 1 million if the transaction takes place outside banking channels.

The authorities concerned cited a final order issued by the Punjab Board of Revenue, which was sent to several authorities, including the Registrar of Cooperative Societies, Punjab Land Record Authority, and District Registrar.

The Board of Revenue has directed sub-registrars, assistant directors of land records and transfer/verification officers to strictly implement the penalty. In case of non-compliance, the concerned officers will be liable for failure to recover the charges.

Under the new changes, filers face 15 per cent property transaction tax and 15 per cent capital gains tax (CGT), while non-filers face 45 per cent for transactions and 15 to 45 per cent for CGT, depending on the value of the property. The advance property tax ranges from 3pc (filers) to 20pc (non-filers), based on the value of the property. Non-filer sellers are taxed at a flat 10pc, and 5pc Federal Excise Duty (FED) is applicable on the transfer of property.