Steps taken in the Finance Act 2019 to discourage undocumented and non-cash economy would be a key step towards federal government's initiatives regarding documentation of the national economy, said tax experts. Talking to Business Recorder, tax expert Muhammad Shahid Baig said there was a restriction earlier on non-filers for purchase of specified vehicles and immovable property u/s 227C of the Income Tax Ordinance, 2001 introduced through Finance Act 2018. This section has now been omitted through Finance Act 2019.
As per repealed law, he added, the non-filers were barred from purchasing new motor vehicles manufactured in Pakistan, imported vehicles and immovable property with value exceeding Rupees four million. However, this change in law was not appreciated by any of the stakeholders therefore the federal government was constrained to abolish this provision.
He said a new provision viz section 75A has been inserted through Finance Act 2019 to provide that purchase of immovable property having fair market value of more than five million rupees or any other asset having fair market value of more than Rupees one million shall not be made otherwise than through normal banking channels which means that payment shall be made through crossed cheque drawn on a bank or through crossed demand draft or crossed pay order or any other crossed banking instrument showing transfer of amount from one bank account to another bank account.
For this purpose, he said, fair market value of immovable property means the value notified by FBR under sub-section (4) of Section 68 of the Income Tax Ordinance, 2001 or value fixed by Provincial Authority for the purposes of Stamp duty, whichever is higher.
He said no depreciation, initial allowance, amortization or deduction on account of pre-commencement expenditure shall be allowed for such assets in case of any violation and such amount shall not be treated as cost under section 76 of the Income Tax Ordinance, 2001 for computation of any gain on sale of such assets which will result in higher gain on disposal of such assets. Moreover, as per serial No 12 of the Table providing offences and penalties u/s 182 of the said ordinance (inserted through Finance Act 2019), any person who purchases immovable property having fair market value greater than Rupees five million through cash or bearer cheque shall pay a penalty of 5% of the value of property determined by FBR u/s 68(4) of the Income Tax Ordinance, 2001 or by the Provincial Authority for the purposes of Stamp duty, whichever is higher.
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