Realtors Irked By The Plan To Charge Flat 5pc CGT
A government plan in the Federal Budget 2021-22 to tax capital gains of Rs5 million and above on the sale of immovable property and bring property taxation under the normal regime appears unlikely to materialize after realtors called the move “impractical” and expressed their reservations to officials at the Prime Minister’s House, who invited them to a meeting next week to resolve the issue “for once and all”.
The government has proposed various reforms in the budget to simplify its tax system, as well as various ideas to meet the revenue target, which has resulted in new property taxation decisions. The years-old practice of charging capital gains tax (CGT) on property business has been clarified, and income earned from the deals is also suggested to be brought within the regular tax regime.
The CGT on the immovable property was proposed to be modified to a flat 5% up to a capital gain of Rs5 million in the budget bill 2021-22, as opposed to the existing tax rate range of 2.5pc to 10pc. However, the move, which was apparently aimed at bringing reforms in the tax system, has further complicated the system for realtors, who are not convinced with the idea.
“It’s absolutely impractical,” the chairman of the Federation of Realtors Pakistan, Musarrat Ejaz Khan said. “Secondly, we are still confused and can’t understand the idea. On the one hand, property taxation is being brought under the normal tax regime, and on the other capital gain tax is also there. It brings the real estate sector under multiple taxes slabs.”
“We have addressed our concerns to the PM House from where we have received a positive response. The authorities are supposed to meet with us at PM House next week. Mr. Khan, who is also the chairman of the Naya Pakistan Housing & Development Authority (NPHDA), believes that the budget pronouncements are only recommendations that would be amended if they are not determined to be correct before they are approved.
Considering the focus of the Pakistan Tehreek-e-Insaf government on a particular segment of the economy — the real estate construction industry — many find the taxation proposal for the sector in the Federal Budget 2021-22 quite surprising.
In his budget speech in the National Assembly Finance Minister Shaukat Tarin had said: “Under present legal dispensation current year business loss is adjustable against income under all heads except property and salary income. This is causing hardship to many businesses. As property income has been brought under normal tax regime, therefore, current year business loss has also been allowed to be adjusted against property income.”