Through a recent income tax circular issued on Tuesday, the FBR has eliminated the necessity of acquiring exemption certificates from the Commissioner Inland Revenue for various categories of taxpayers, including non-resident individuals, according to Section 7E of the Income Tax Ordinance 2001.

As a result, all Punjab cases will be exempt from the regulations stipulated in Section 7E. The exemptions specified in the law under Section 7E will not require individuals to approach the Commissioner of Inland Revenue for exemption certificates, he added.

Circular number 3 of 2023, released by the FBR on Tuesday, has eased numerous procedural requirements of Section 7E. This step has been taken to address any challenges arising from the implementation of the newly-introduced sub-section (2A), as a partial modification and addition to the guidelines in Circular No. 1 of 2023-24.

It has been clarified that the contents of the circular will not be applicable to cases within the jurisdiction of the LHC, as stated in the judgment of WP no. 52559 of 2022, unless this judgment is overturned, suspended, or annulled in an intra-court appeal or by the Supreme Court of Pakistan.

Moreover, the FBR has declared that non-resident individuals, including non-resident Pakistanis, are not obligated to pay taxes on immovable properties as per Section 7E of the Income Tax Ordinance 2001.

Additionally, the condition of acquiring exemption certificates from the Inland Revenue Commissioners for various cases has been relaxed in accordance with the aforementioned circular.

The FBR emphasized that this explanatory circular, issued to facilitate property sales or transfer transactions, will remain effective temporarily until an automated system for this purpose is developed.

Furthermore, it has been clarified that the requirements of obtaining a certificate from the Commissioner, outlined in Circular No. 1 of 2023-24, will not be applicable to the specified situations. However, the authority responsible for property transfers will maintain a proper record of seller/transferor data, alongside pertinent documents for properties involved in the sale/transfer within these specific situations.

The transferring authority will share this recorded data with the relevant Chief Commissioner of the Regional Tax Office overseeing the seller/transferor on a weekly basis, starting from the issuance date of this circular.

According to the circular, Section 7E of the Ordinance will not be applicable to immovable property owned by a local authority, a development authority, builders, and developers engaged in land development and construction. This exemption is contingent upon these entities being registered with the Directorate General of Designated Non-Financial Business and Professions (DNFBP).

The provisions of Section 7E do not apply to properties acquired in the first year, provided the purchaser has duly paid tax under Section 236K. In such instances, the seller/transferor will need to provide the transferring authority with a Computerised Payment Receipt (CPR), bearing a unique CPR number, the seller or transferor’s details, CNIC number, tax paid under section 236K, payment date, and tax year.

Additionally, Section 7E of the Income Tax Ordinance, 2001 does not pertain to immovable property allotted to martyrs or their dependents from the Pakistan Armed Forces, individuals who die while serving the federal and provincial government, war-wounded individuals in the service of the Pakistan Armed Forces or government, ex-servicemen, and current personnel of the armed forces or government employees.

Consequently, for sellers or transferors falling within the aforementioned categories, the conditions for furnishing evidence to the transferring authority outlined in Circular No. 1 of 2023 will not be applicable.

The FBR has received numerous representations concerning the manner of providing evidence regarding the application of Section 7E of the Income Tax Ordinance, 2001 for the purpose of immovable property sale or transfer, as described in sub-section (2A) of section 236C of the Ordinance.

To address any challenges in implementing the newly-introduced sub-section (2A), a partial modification and addendum to the instructions in Circular No. 1 of 2023-24 have been made.

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