ISLAMABAD, July 9(ABC): The Federal Board of Revenue (FBR) has made major adjustments to the advance tax on capital gains on the disposal of immovable property, paving the way for the imposition of an inheritance tax, officials said Friday, with the experts terming the move “unjustified and arbitrary”.
The revenue authority has included inherited and gifted property in its tax net by amending the Finance Act of 2022 to impose an advance tax on sellers and buyers and collect Capital Gains Tax (CGT) on such properties.
The action is viewed by tax specialists as the implementation of an inheritance tax. “The federal government is prohibited from collecting Capital Gains Tax on inherited or gifted property. The act violates the Constitution,” according to an expert.
“Irrespective of the need to increase the tax burden on incomes from real estate transactions, some of the changes made are unjustified, arbitrary, and against the principles of fair taxation,” the expert added.
The scope of capital gains tax was extended to real estate in 2012. In addition to the imposition of a capital gains tax on the sale of immovable property, an adjustable withholding tax will also be collected from sellers of immovable property.
The FBR circular clarified that the advance tax has been introduced for the purpose of providing a mechanism for the collection of capital gains tax on the disposal of immovable property.
“The actual quantum of capital gain and tax payable thereon is to be computed at the time of filing of return of income,” the circular said.