Hundreds of housing schemes are 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 article 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 existing housing society. There is no physical existence of files that are not authorized by any authority.
The range in which files are distributed is decided by society. The number of plots the society intends to give customers is the subject of the files. A small percentage of the total price of the plot may be available for a 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 total 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 particular stage. We will explain this process 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 client’s name, 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 file types are proof of ownership of a piece of land in a housing project, and the Federal Board of Revenue does not consider their real property.
Balloted Files in Real Estate
Balloting is the second stage of the journey of files, and it is where society picks out the members and votes the files down. The files move on to the next stage, 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 to the next possession stage. At this point in the conversion process, the society declares the file converted into a file in the customer’s name. It 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.
Tax is usually implemented on the file between the balloting and possession stages when the plot number is issued to the customers. 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 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 two categories, filers and non-filers, both of which are registered through an NTN number. The amount of tax a person has to pay is lower than 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. Whether you are a filer or non-filer, you must pay government-implemented tax sooner or later against your plot. Tax is applied to the file between the balloting and possession stages when the plot number is allotted. It is recommended that file owners become filers to enjoy tax benefits and knowledge of FBR tax policies.