There are hundreds of housing schemes operating in Pakistan and plots are sold to customers via files. It’s a question that often arises in the minds of investors and end- users, whether they have to pay tax on the files they purchase. This is an article that will answer the question for you.
What is a property File in real estate?
In real estate terminology, a file is a document promising the delivery of a piece of land in an upcoming or already existing housing society. There is no physical existence of files and they are not authorized by any authority.
The range in which files are distributed is decided by the society. The number of plots the society intends to give to the customers are the subject of the files. A small percentage of the total price of the plot may be available for down payment or booking charges.
Customers can pay to get ownership, and society works on development. After a series of events like balloting and possession, files are converted into plots and issued to buyers. People who can’t pay the full cost of a plot can purchase files at low prices and pay installments to become owners.
Taxes on Property Files
Types of files
Generally, there are different stages and types of files, and tax is applied after a certain stage. This process will be explained step-by-step so you can understand it.
Open Files and Closed Files
Open and closed files are provided at the beginning of the project. Closed files are registered in the name of the client, while open files are not. Open files are preferred by end- users who want to pay installments, while closed files are preferred by short-term investors who want to build homes. Both of these file types are just proof of ownership of a piece of land in a housing project and the Federal Board of Revenue does not consider them to be real property.
Balloted Files in Real Estate
Balloting is the second stage of the journey of files and it is where the society picks out the members and votes the files down. The files move on to the next stage, which is possession, from here. A balloted file indicates that your ownership of a piece of land/plot is confirmed and will be issued in your name. Plot numbers are usually implemented after the balloting. A file can become eligible for tax implementation at this stage. After the file is balloted, a number is assigned to the plot, and most of the time, FBR implements tax.
Possession Files in Real Estate
After the file is balloted, it moves on to the next stage of possession. At this point in the conversion process, the society declares the file that is converted into a file on the customer name. This means that the rightful owner of the numbered plot is the file owner. As your plot becomes an actual property, a tax will be implemented on it.
When the plot number is issued to the customers, the tax is usually implemented on the file between the balloting and possession stage. Tax is usually implemented on the housing project, and then on the customers, by the management. The tax is added to the ledgers of customers by the society.
What is the Amount of Tax on property files?
The amount of tax is calculated using the diaphragm created by the Federal Board of Revenue FBR divides taxpayers into 2 categories, filers and non-filers, both of which are registered through an NTN number. The amount of tax that a person has to pay is low compared to others.
The tax for both filers and non- filers is given below.
Tax for Filer
- Filer has to pay 2% (of market value) as tax to FBR
Tax for Non-Filers
- Non-filer has to pay 7% (of market value) as tax to FBR
We hope the article answers your question about whether tax is implemented on a file or not. Whether you are a filer or non-filer, you have to pay government-implemented tax sooner or later against your plot. When the plot number is allotted, tax is applied to the file between the balloting and possession stages. It is recommended that file owners become filers in order to enjoy tax benefits and knowledge of FBR tax policies.