The revenue board, in a clarification, has made it clear that undisclosed money can be invested only in buying residential buildings and apartments without facing any queries from taxmen, but not in purchase of land.
The special tax treatment on investment of undisclosed money would not be applicable to purchasing land, the National Board of Revenue (NBR) said in the clarification.
The Income Tax wing of the board issued the clarification as the field-level tax offices were facing complexities over dealing with the taxpayers who invested undisclosed money in purchase of land along with residential buildings and flats.
The NBR sent the clarification Tuesday to all its tax offices and other stakeholders across the country.
In the clarification, signed by second secretary (tax law-1) Md Jasimuddin Ahmed, the tax authority said the special tax treatment would be applicable only to residential buildings that would be purchased with equivalent or higher deed value than that of its land.
"Taxpayer who purchases residential building with land would be entitled to enjoy the special tax treatment under 19BBBBB in case of higher or equivalent deed value for the building than that of the land," the clarification said.
However, the taxmen would not allow the investment of undisclosed money without question under the provision in case of lower deed value of the residential building and flat than that of its land, it said.
Taxmen would consider such investment as purchase of land with residential buildings/flats by the taxpayers due to higher prices of land compared to those of residential buildings, it said.
A senior tax official said the issue came into focus after a few taxpayers claimed the special tax treatment for residential buildings while they purchased high-priced land along with tiny buildings.
The clarification also said disclosure of investment sources would be mandatory for land that a taxpayer purchased earlier and built any house on that land later.
"The provision in the Income Tax Ordinance, incorporated through the Finance Act-2013, is only applicable to purchase of residential buildings and apartments, and not for investment in buying land," it said.
On purchase of apartments, taxpayers will be able to pay taxes as per the provision on plinth area. In that case, it is not required to give separate explanation for the land on which the flats have been built.
Under the existing provision, the undisclosed money-holders have to pay a high rate of tax per square metres of flat on the basis of area that they purchased with the undeclared money.
Considering the ongoing crisis in the real estate sector, the NBR kept the opportunity unchanged in the current fiscal year's budget.
In the fiscal the NBR received Tk 260 million in taxes from about 2,550 people who purchased residential buildings and flats by investing their undisclosed income.
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