Section 7E will not be applicable within the jurisdiction of LHC: FBR

The Federal Board of Revenue (FBR) has adopted the Lahore High Court’s (LHC)’s judgment regarding Section 7E of the Income Tax Ordinance 2001, according to news published on August 16. Now, Section 7E will not be applicable to cases (both filers and non-filers) within the LHC’s jurisdiction.

FBR Eliminates Exemption Certificates

In a recent income tax circular, the FBR eliminated the requirement for exemption certificates from the Commissioner of Inland Revenue. However, this change applies to various taxpayer categories, including non-resident individuals, as stipulated in Section 7E (tax on deemed income basis).

Section 7E

According to sources, real estate expert Muhammad Ahsan Malik explained that Section 7E won’t apply to property transfers within Punjab, regardless of the filer or non-filer status. Thus, cases in Punjab won’t require Commissioner of Inland Revenue exemptions.

Circular No 3 Clarification

Through Circular No 3 of 2023, the FBR eased procedural conditions outlined in Section 7E. The circular clarifies its applicability in cases under the jurisdiction of the LHC. Unless its decision with reference to the judgment in WP no 52559 of 2022, reverses.

Read: FBR Provides An Exemption From Taxation For The Transfer Of Agricultural Properties

Immovable Properties Tax

Non-resident individuals, including non-resident Pakistanis, are now exempt from paying tax on immovable properties under Section 7E. The circular streamlines the exemption certificate process specified by the Inland Revenue Commissioners. This explanatory circular simplifies property sale or transfer transactions temporarily until an automated system is developed.

The conditions in Circular No. 1 of 2023-24 won’t apply in certain cases, but the transferring authority will maintain seller/transferor records shared with relevant tax offices.

FBR Inquiry

The FBR received inquiries about furnishing evidence for Section 7E’s application. Certainly, to facilitate the newly introduced sub-section (2A) implementation, Circular No. 1 of 2023-24 has been modified and extended.

Read: FBR Plans To Launch An Online Service To Grant Exemptions And Collect 1% Tax On Immovable Property

Conclusion

Stakeholders from many industries remain vigilant about future developments as the legal and financial landscapes continue to change in the wake of the LHC’s decision. Moreover, the case highlights the significance of flexible and fair tax policies in a connected world while also challenging the application of Section 7E will not applicable.