The revenue authority is set to ease tax burdens on income derived from acquiring immovable property, mainly land, as compensation to provide tax relief to affected individuals.
The Income Tax Wing under the National Board of Revenue (NBR) would consider the current 3.0-6.0 per cent advance income tax (AIT) paid on compensation amounts (capital gains) as final taxes from the 2023-24 tax year onwards, officials said.
A statutory regulatory order (SRO) formalising this change is expected soon.
The government and other public agencies mainly acquire lands for different development projects.
For income received as compensation for acquiring immovable assets, the source tax or AIT is 6.0 per cent in city corporations, pouroshavas and cantonment board jurisdictions, and 3.0 per cent in other areas.
Currently, compensation amounts are subject to regular tax rates, with any mismatches between source tax and final tax liability adjusted.
However, a senior NBR official said the board has decided to exempt this income from any additional taxes beyond the initial source tax. He said some individuals suffer heavy tax burdens due to the combined effect of compensation income and their regular taxable income.
A relevant provision from the previous 1984 Income Tax Ordinance was absent in the new 2023 tax law, he added.
According to the 1894 Land Acquisition Act, government entities can acquire private land for public interest. However, the law does not provide adequate scopes for owners to challenge such acquisitions.
In the national budget for FY2020-21, the government increased the AIT on compensation amounts three times from 2.0 per cent to 6.0 per cent for the property situated in any city corporation, municipality or cantonment board area.
In other areas, the rate climbed from 1.0 per cent to 3.0 per cent. According to NBR officials, the AIT hike followed a similar rise in compensation amounts for acquired properties.
In 2017, the government approved a compensation scheme offering affected individuals up to three times the market value of their land.
According to the Acquisition and Requisition of Immovable Property Act 2017, additional compensation of 200 per cent of market value applies when government agencies acquire land and 300 per cent when private organisations do so.
The AIT collected under this provision is considered minimum tax and non-refundable.
© 2024 - All Rights with The Financial Express
