In a recent move aimed at ensuring compliance with tax regulations, the Punjab government has decided to enforce a 5% penalty on immovable property purchases made through non-banking transactions. This measure falls under the purview of the Income Tax Ordinance, 2001, and seeks to regulate property dealings more stringently. Let’s delve into the details of this directive and its implications for stakeholders.
What Does the Law Say?
According to Section 75A of the Income Tax Ordinance, 2001, read with entry no. 21 of Chapter X, a penalty of 5% is chargeable on property transactions conducted through non-banking channels. This rule applies if:
- The fair market value of the immovable property exceeds five million rupees.
- The fair market value of any other assets involved is more than one million rupees.
This legislation emphasizes transparency in financial dealings and discourages the use of cash or untraceable methods in high-value transactions.
Directive Issued by the Board of Revenue, Punjab
The Board of Revenue, Punjab, has circulated a letter addressing key authorities, including:
- The Registrar Cooperative Societies, Punjab.
- The Director General, Punjab Land Records Authority.
- District Registrars and Deputy Commissioners across Punjab.
The letter highlights that sub-registrars, assistant directors of Land Records, and transferring officers—designated as withholding agents—have largely failed to collect penalties on non-compliant transactions. This issue was identified during a pre-PAC (Public Accounts Committee) meeting chaired by a Senior Member of the Board of Revenue, Punjab.
Accountability Measures
To rectify this, the following measures have been outlined:
- Enforcement of Penalty Collection:
- All relevant officers, including sub-registrars and assistant directors of Land Records, have been instructed to ensure the collection of the 5% penalty on applicable transactions.
- Accountability of Officers:
- Transferring and attesting officers failing to collect the penalty will be held personally responsible for non-compliance.
- Field Formation Instructions:
- Directives have been circulated to all field formations to ensure adherence to the cited law.
Implications for Buyers and Sellers
For individuals engaging in property transactions, this development underscores the importance of conducting dealings through banking channels. Key takeaways include:
- Avoidance of Penalties: Transactions through proper banking channels will shield parties from incurring the 5% penalty.
- Legal Compliance: Adhering to these regulations fosters transparency and aligns with government efforts to regulate financial transactions.
Why This Enforcement Matters
This move reflects a broader initiative to combat tax evasion and streamline financial oversight in property dealings. By penalizing non-banking transactions, the Punjab government aims to:
- Reduce unaccounted cash flows in the property market.
- Ensure fair revenue collection under the Income Tax Ordinance.
- Promote transparency in high-value asset transactions.
Conclusion
The introduction of a 5% penalty on non-banking property transactions marks a significant step towards stricter enforcement of tax laws in Punjab. Buyers, sellers, and property agents must now ensure compliance with these regulations to avoid financial penalties and legal complications. By prioritizing banking transactions, stakeholders can contribute to a more transparent and regulated property market in Punjab.
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