Real Estate Sector to Get Rs15 Billion Tax Relief

The real estate sector is a lucrative investment avenue for local and overseas investors, which is connected with 40 allied industries and 200 sub-industries. When the Budget 2022-23 was proposed, several new tax measures for real estate were introduced. These new measures are:

• Capital Gain Tax (CGT) increased to 15%

• FBR increased advance tax to 2% for filers and 5% for non-filers.

• Individuals who have multiple properties (value over Rs250 million) and derive rental income equal to 5% of the fair market value of the capital assets will pay 20% tax on their rental income along with 1% tax on overall rental income.

However, industry professionals considered these new taxes unnecessary since they negatively impacted the property sector’s growth. According to real estate professionals, business activity in the property sector slowed by 50% in July, creating unemployment and discouraging investment. Considering the reservations about the sector’s growth, the government has decided to give tax relief of Rs 15 billion by withdrawing 20% of deemed income tax. According to the old tax regime, the deemed income tax applied to only unutilised properties worth Rs 25 million, but the new law states that deemed income tax applies to every capital asset from a property owned by a resident person to self-owned agricultural land where agricultural activity is carried out by the person except farmhouses.

Furthermore, the government officials are also considering giving Rs60 billion tax relief to traders, bankers, stock market and transporters, which will increase to Rs75 billion with the addition of the realty sector.  Also, the authorities are planning to reduce the tax burden on rich people and influential businesses, which will indirectly burden the salaried class through higher taxes and 25% inflation. Moreover, a presidential ordinance will be introduced to implement tax measures which will neutralise the adverse revenue impact by increasing the burden on other sectors. In addition, fixed tax on traders will be reduced from Rs 42 billion to Rs27 billion. However, this gap of Rs 15 billion will be bridged by taxing other sectors.