As the last day of the budget discussions is coming to a close, the real estate associations led by Real Estate Consultants Association (RECA) continue to protest as their demands regarding the amendment in section 37 of the Finance Bill 2021-22 seems to have fallen on deaf ears.
Despite the strong awareness campaigns run by RECA, and other real estate associations, there is no clarity whether the government would be going forward with FBR’s newly proposed tax amendments or will continue with the capital gain tax regime of the previous financial years.
Under the current tax regime (2020-21) Capital Gains, within the first year, of less than Rs. 5 million are taxed at 2.5%, above Rs. 5 million but less than Rs. 10 million are taxed at 5%, above Rs. 10 million but below Rs. 15 million are taxed at 7.5% and above 15 million are taxed at 10%.
The RECA representatives say that the increase in taxes levied on the sector is a non-issue. And if the government wants to raise more revenue from capital gains it should increase the ratio of fixed taxes. The real issue the association has is with the proposal by the FBR for the amendment in Section 37 of the Finance Bill 2021-22 to make capital gains tax a part of the regular income tax of an individual. Were this to happen, any cumulative capital gain above Rs. 6 million will then be taxed at 35% under the highest slab of income tax.
The association says that according to the international financial norms, the capital gains, being gains on assets, are always taxed separately on the sale of particular assets as an individual item and are not added to the regular income.
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RECA has issued several advertisements to key national television channels like Dunya, Geo, ARY, Hum, 92 News, and others to create awareness among the mass population and get its message across.
In a video message, General Secretary RECA Muhammad Ahsan Malik explains that real estate contributes significantly to the economy of Pakistan, and how ignoring it would have serious consequences for the economy and the common people of Pakistan. He adds that the increase in foreign remittances over the past year can be attributed to the growing real state sector of the country.
He argues that if the government does not give concessions to the real state sector of Pakistan, the government’s efforts to revive and induce growth in the construction industry of Pakistan will prove futile.
Mr. Malik reaffirmed the argument by all the real estate associations that, “Nowhere else in the world, the tax is levied such that the ‘other income tax’ is clubbed with the ‘property gain tax’ of an individual”.
General Secretary of RECA reiterated that his association and other real estate associations nationwide had already sent some suggestions to the relevant departments, and they must be reviewed and implemented upon in the upcoming budget for the fiscal year 2021-22.
These associations also believe that if the newly proposed amendments in Section 37 are finalized and acted upon, the housing sector of Pakistan will be heavily impacted.
This in turn would lead to the disturbance in the ongoing growth of the real estate sector and impact buyers as new taxes would be imposed. Moreover, people who are trying to build their own homes would be deterred from doing so, as the cost of building a house would increase.
This will impact the inward remittance flow as reportedly a huge amount of non-resident Pakistanis are investing in the real estate sector of Pakistan.
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Although all the stakeholders are hoping that the government and the finance bill reviewing authorities have been sympathetic towards the real estate sector of Pakistan, but the lack of clarity has people worried as the budget discussions are expected to close today, and the revised finance bill 2021-22 is expected to be presented to the parliament for voting tomorrow.