The fair market value of immovable property shall be the value notified by the Federal Board of Revenue (FBR) for the purpose of investigating cases of unexplained assets or investments within the real estate sector under section 111 of the Income Tax Ordinance 2001. In this regard, the FBR has issued Income Tax Rules, 2002 through S.R.O.978(l)/2O16 here on Tuesday to specify procedure for valuation of assets for the purposes of section 111 of the Income Tax Ordinance.
Sources said that the FBR has given legal cover to the investigation within the real estate sector to probe source of investment under section 111 of the Income Tax Ordinance. At present three kinds of values are being used for registration of immovable properties. The first is the registry value based on DC rates. The second is the fair market value of immovable properties based on FBR valuation table and third is the actual consideration exchanged between the parties (purchaser and seller). The third is the actual sale agreement or banking transactions disclosing the real value on which property has been traded. This category covers the actual price of immovable property which has been transacted. In case the tax department detects the actual sale agreement or banking transaction on which property has been purchased/sold, this would form basis of the actual value for probing source of investment under section 111 of the Income Tax Ordinance.
According to the notification, the valuation of immovable property for the purposes of section 111 of the Income Tax Ordinance shall be taken to be: Firstly, the fair market value of immovable property shall be the value notified by the Board under sub-section (4) of section 68, in respect of area or areas specified in the said notifications.
Secondly, if the fair market value of any immovable property of any area or areas has not been determined by the Board in the notification referred to in sub-section (4) of section 68, the fair market value of such immovable property shall be deemed to be the value fixed by the District Officer (Revenue) or provincial or any other authority authorized in this behalf for the purposes of stamp duty.
Thirdly, in the case of agricultural land, the value shall be equal to the average sale price of the sales recorded in the revenue record of the estate in which the land is situated for the relevant period or time.
Fourthly, if in a case sale price recorded in the instrument of sale of any property is higher than the fair market value as determined under clauses (a), (b) and (C), the applicable price shall be higher of the two.
Fifthly, in the case of sale price of any auctioned property or the fair market value as determined under clauses (a), (b) and (c), the higher price shall be applicable. Previously, under income tax rules, the valuation of immovable property for the purposes of section 111 shall be taken to be-
(a) in the case of open plot, the value determined by the development authority or government agency on the basis of the auction price in respect of similar plots in the area where the plot in question is situated or in case where such value is not determined, the value fixed by the District Officer Revenue or provincial authority authorized in this behalf for the purposes of stamp duty;
(b) in the case of agricultural land, the value equal to the average sale price of the sales recorded in the revenue record of the estate in which the land is situated for the relevant period or time; or (c) in the case of constructed immovable property, value shall be determined at the fair market value as defined in section 68 or the value fixed by the District Officer (Revenue) whichever is higher.], it added.
Following is the text of the notification issued here on Tuesday: S.R.O.978(l)/2O16.- In exercise of the powers conferred by sub-section (1) of section 237 of the Income Tax Ordinance, 2001 (XLIX of 2001), the Federal Board of Revenue is pleased to direct that the following further amendments shall be made in the Income Tax Rules, 2002 namely:
In the aforesaid Rules, in rule 228, in sub-rule (1),- for clauses (a), (b) and (c), the following shall be substituted, namely:
"(a) the fair market value of immovable property shall be the value notified by the Board under sub-section (4) of section 68, in respect of area or areas specified in the said notifications;
(b) if the fair market value of any immovable property of any area or areas has not been determined by the Board in the notification referred to in sub-section (4) of section 68, the fair market value of such immovable property shall be deemed to be the value fixed by the District Officer (Revenue) or provincial or any other authority authorized in this behalf for the purposes of stamp duty; and
(c) in the case of agricultural land, the value shall be equal to the average sale price of the sales recorded in the revenue record of the estate in which the land is situated for the relevant period or time;
(d) if in a case sale price recorded in the instrument of sale of any property is higher than the fair market value as determined under clauses (a), (b) and (C), the applicable price shall be higher of the two; and (e) in the case of sale price of any auctioned property or the fair market value as determined under clauses (a), (b) and (c), the higher price shall be applicable."
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