FBR has decided to increase property valuation by on average 30% in 21 major cities, bringing their valuation to 85% of market prices. This policy has been adopted to increase tax collection and decrease the amount of black money in the property business.
The current government has increased the property valuation rates for the second time in the past six months. FBR has estimated that this would increase tax revenue by almost Rs 40 billion. FBR Member of Inland Revenue Dr. Hamid Ateeq Sarwar said that “after the fresh increase, the property valuation rates are now around 85% of their fair market value.” The rates are applicable from July 24, 2019.
Meanwhile, the property dealers are not happy about this policy. They argue that the government’s austerity measures have already taken their toll on businesses and now this policy would further reduce their sales. Moreover, FBR has increased the withholding period, liable to taxation on capital gains, from three years to four years. This means that any gains on property sold before holding it for at least four years would be liable to capital gains taxation.
However, this step would plug the loophole of black money investments in the property business. To understand this we have to know that there are three types of property valuations, namely, the deputy collector rates of provinces (the lowest), the FBR determined rates and the actual market rates. By implementing this policy, the government has brought the property valuation to 85% of the market value. Hence, increasing the amount of taxable income, reducing the gap between the different valuation rates and decreasing the margin for black money investments. The gaps will also reduce the terror financing issue of Pakistan, which occurs mainly through black money.