With the approval of the Punjab Finance Bill 2013, incorporating an amendment moved by Finance Minister Mujtaba Shujaur Rehman, the provincial budget was passed on Thursday.
All 43 demands for grants (Rs1,210.21 billion) had already been approved on Wednesday.
The government has set itself a Rs126.7 billion target for tax recovery.
Under the Punjab Agricultural Income Tax Act 1997 any person declaring agricultural income in the returns filed under the Income Tax Ordinance 2001, is liable to pay tax. Law Minister Rana Sanaullah Khan said on Thursday, however, that if anyone declared agricultural income in the tax returns along with urban/industrial income, they would be liable to pay only the urban/industrial tax and exempt from the agriculture tax.
Sanaullah added such a declaration would not be assessed unilaterally. He said tax on income from agriculture would not be imposed on farmers owning land below 12 acres.
Capital gains tax on immovable property
After the 18th Amendment was passed, the taxes on capital gains on immovable property had become standard. The seller is liable to pay this tax. The tax rate will decrease from 5% to 1% as the retention period was increased. No tax shall be charged on properties acquired, sold and retained beyond five years.
The finance minister said the tax would discourage speculation in the real estate business and help keep the prices of properties at a reasonable level. The tax collector shall determine, assess and collect the capital gains tax by calculating the difference in valuation at the time of acquisition and sale on the basis of the valuation table notified under Stamp Act 1899.
Luxury tax on houses
A one-time luxury tax will be recovered on houses measuring two kanals and more. The tax liability will increase with increase in the size with a maximum of Rs1.5 million.
The rate of tax for residential houses measuring 1,000 square yards and above but less than 2,000 square yards is Rs500,000. Residential houses measuring 2,000 square yards but less than 4,000 square yards will be taxed Rs1 million and residential houses measuring 4,000 square yards and above will be taxed Rs1.5 million.
Widows will be exempt from the tax to the extent of one house up to four kanals. Houses for which the tax has been paid once will not be liable for a subsequent sale or transfer.
Tax on five-marla houses
According to Rehman, high-value small residences, including costly residential apartments in posh areas will not be tax exempt.
It is proposed to confine the exemption to residential properties only in areas populated by middle and lower income groups. Rehman clarified that only four areas of Lahore – Gulberg, Model Town, GOR 1 and Upper Mall – two residential areas in Rawalpindi and one in Faisalabad district are under Category A.
Published in The Express Tribune, June 28th, 2013.