Five Marla Tax Exemption: Punjab Pakistan

Property Tax Exemption: Five Marlas

Residential houses of five marlas or less not falling in Category A are exempt from property tax. A five-marla house will attract payment of property tax only if it has a Gross Annual Rental Value of Rs 5,000 or more and is situated in a locality where Category A has been applied. Category A is the category of the valuation table having a rate of Rs 15 per square foot per month, which refers to the monthly rental payment a house is capable of fetching. 

Is the five-marla exemption only for owner-occupied houses?

No, it is for both rented and owner-occupied houses. You do not have to pay property tax on a residential house measuring up to five marlas in size even if you have let it out.

Is this exemption available for a 10-marla house co-owned by two persons?

No. Property tax is on property, not on the owners of the property; therefore, it is the property which determines the property tax. Two persons owning a 10-marla house are co-owners of a house measuring more than five marlas, and thus are not entitled to the exemption from payment of property tax.

Punjab Pakistan: Property Tax Survey 2013-14, Part 3

Effect of Property Tax Survey 2013 on Tax Revenue

The Property Tax Survey 2013-14 is in process, and the government of Punjab will use it to increase revenue. The government plans to double property taxes by January 2014. A taxpayer who has already paid property tax for the financial year 2013-14 will have to deposit the difference between the old and new tax liability during the month of January 2014.

Although the government has decreased the tax rate from 20% to 10%, the tax liability of a taxpayer will be doubled because of several factors, including various factors affecting the determination of rental value of properties. The government is currently collecting tax on rental value per square feet at 2003-04 rates. When these rates are revised, we are likely to get a 100% increase in rental values (based on a simple approximation that rental values have increased by 10% per year over a period of 10 years, i.e., from 2003-04 to 2013-14).

The government is now collecting about Rs 4 billion in property taxes. After the survey, the collection is expected to be about Rs 7 billion.

Punjab Pakistan: Can I download the PT1 form online?

Downloading the PT1 form from the Excise and Taxation Department's website is not possible, as the Department does not offer such services at present. However, the computerization of property tax records is in process in many of the districts in Punjab, and we may expect such services in the near future.

The Excise and Taxation Department also has plans to provide the taxpayer with services like online verification of tax payments, an online property tax tax calculator, etc.

You may also like to read:

  Understanding your PT1 form

 What is a PT1 or Form PT1?

 Is Form PT1 an ownership document?

Punjab Pakistan: Why should I pay property tax arrears of a previous owner?

Why should I pay property tax arrears of a previous owner?

I have just purchased a house, and the Excise and Taxation Department is pressing me hard for payment of the past several years' property tax. Am I liable for payment of such arrears?

A similar question arises when a new owner receives a notice of property tax demand issued in the name of the previous owner and assumes that the tax liability is of the previous owner, not the new owner.

The law does not support the new owner's assumption. The property tax is on the annual value of a property and as such is attached to the property itself, not to the owner of the property. Hence, on transfer of ownership the property tax liability is transferred to the new owner of the property. The new owner is now liable to pay the property tax on the property.

The new owner has the right to sue the previous owner if the previous owner did not tell him about the property tax liability existing at the time of purchase of the property. However, the government or the Excise and Taxation Department is not a party to the contract of sale. Moreover, nothing in the sale deed can override the law, namely, the Urban Immovable Property Tax Act of 1958.

In addition to the above, Rule 12 of the Property Tax Rules places several responsibilities on an owner. Under this rule, the owner of a property shall within a period of one month from the date of occurrence of any transfer, demolition, destruction or addition, report to the assessing authority of the rating area:

• all transfers thereof by sale, gift, exchange or perpetual lease;
• any increase in rent subsequent to the date on which the value of such property was last assessed;
• the demolition or destruction of the property or any portion thereof; and
• any substantial addition to the property whether or not such addition has occasioned an increase in rent.

What are the property tax rates in Punjab, Pakistan, for 2013?

What are the property tax rates in Punjab, Pakistan, for 2013?

The rates of property tax are defined at two levels:

• The rate of notional rent for a locality; and
• The rate of tax on the Annual Rental Value of a property.

The rate of property tax at the first level is defined by the locality in which a property is situated. The rate of property tax on Annual Rental Value is 10% after December 2013. Up till December 2013, the rate of property tax on Annual Rental Value is 20%.

Example of Property Tax Calculation

If a property has a notional rent of Rs 2,000 per month, then its tax is calculated as follows:

Gross Annual Rental Value                  =  Rs 2,000 x 12
                                                        =  Rs 24,000

Annual Rental Value                           =  Gross Annual Rental Value - 10%

                                                        =  Rs 24,000 - 10% of 24,000

                                                        =  Rs 24, 000 - 2,400

                                                        =  Rs 21, 600

Property Tax before January 1, 2014   =  20% of Annual Rental Value

                                                        =  20% of Rs 21, 600

Property Tax before January 1, 2014    =  Rs 5,400

Property Tax after January 1, 2014      =  10% of Annual Rental Value

                                                        =  10% of Rs 21, 600

Property Tax after January 1, 2014      = Rs 2,160

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Old Rates of Property Tax Are There Again

Punjab Pakistan: Property Tax Exemptions

Property Tax Exemptions

The following properties are exempt from payment of property tax:

1. Properties of the Federal Government;
2. Properties of the Punjab Government;
3. Properties of a local government in Punjab;
4. Commercial properties with an annual value of less than Rs 1,080;
5. Owner-occupied residential properties with an annual value of less than Rs 1,620;
6. Properties used exclusively for educational purposes, including schools, boarding houses and hostels of the Government;
7. Properties like public parks, playgrounds and libraries;
8. Properties used exclusively for public worship or public charity, including mosques, temples, churches, dharamsalas, gurdwaras, etc;
9. Widow-owned properties with an annual value less than or equal to Rs 48,600;
10. Minor-orphan owned properties with an annual value less than or equal to 48,600;
11. One residential house of up to one kanal owned and occupied for his residence by a retired public servant:
12. Residential houses of up to five marlas in notified Katchi Abadis;
13. Residential houses with an annual value of more than Rs 5,000 in Category A areas.

Property tax is assessed for these properties, but is not collected.

Punjab Pakistan: Property Tax Survey 2013-14, Part 2

What is different about Property Tax Survey 2013-14?

The Property Tax Survey 2013-14 is different from other property tax surveys in the following ways:

Use of Notional Rents

Property tax assessments are based on notional rents instead of actual rents. These notional rents are ascertained by the Excise and Taxation Department through sample surveys of localities falling in the rating areas. (Rating areas are areas where property tax is applicable under §3 of the Urban Immovable Property Tax Act of 1958.)

Computerization of Records

Property tax records are being computerized by The Urban Unit. The process is being carried out by the surveyors of The Urban Unit in coordination with Excise and Taxation inspectors.

Use of Photographs

While the properties are being surveyed, photographs are also being taken to record the size, nature, and use of the properties. These photographs are part and parcel of the overall computerization of property tax records.

Mapping of Properties

Properties are being mapped on Google Maps using the Global Positioning System (GPS). These maps will help locate properties in future.

Punjab Pakistan: Is Form PT-1 an ownership document?

Is Form PT1 an ownership document?

The Excise and Taxation Department keeps records of property in a PT1 Register. A copy of the record of a single property from such a register is commonly called Form PT1.

This PT1 form contains information on property and its ownership, but it is not a proof of ownership of a property. Form PT1 is only a record kept for taxation of the property, and its purpose is not to show ownership.

Punjab Pakistan: Property Tax Survey 2013-14

What is the Property Tax Survey?

The Property Tax Survey is in fact a reassessment of property tax. The government of Punjab normally carries out the survey for the purpose of increasing tax collection from property taxpayers every five years. However, the current Property Tax Survey is being carried out after a lapse of about ten years.

The increase in tax collection resulting from the Property Tax Survey is generally due to the following:

1. Increased rent of properties fetched by their owners;
2. Construction of new properties in new colonies and other areas;
3. Commercialization of properties;
4. Changes in size and use of properties.

Who carries out the Property Tax Survey?

The Property Tax Survey is carried out by the Excise and Taxation Department of the government of Punjab.

How is the Property Tax Survey carried out?

Inspectors from the Excise and Taxation Department go door-to-door to collect information on the size, nature of use, and ownership of properties. The collected information is compiled in Survey Registers. The Survey Registers so created are the basis of the PT1 Register. In turn, the PT1 Register provides the basis for a PT-8 Register, which is the demand and collection register of property tax.

The inspectors from the Excise and Taxation Department mark properties with numbers which are used for identification of properties and tax liability thereon. These numbers are invariant (they do not change, in general), and are analogous to the NTN number in the case of income tax.

Continued

How to submit an application for reduction in property tax

Application for reduction in property tax

An application for reduction in property tax may be submitted to the Excise and Taxation Officer or Assistant Collector. A fee of Rs 5 should be affixed to the application. The process goes like this:

1. You write the application stating your contentions. Generally, the contention or basis for reduction is self-use or non-commercial use of a property;
2. You submit the application stating the property number and grounds of reduction;
3. The Excise and Taxation Officer marks or sends the application to his field inspector for verification of the reason stated as the ground of the reduction in property tax;
4. The field inspector submits his report to the Excise and Taxation Officer through an Assistant Excise and Taxation Officer (Internal Auditor);
5. The Excise and Taxation Officer accepts or rejects your case based on the field report and evidence submitted by you.

The effective date of the decision of an Excise and Taxation Officer is the upcoming first of January or July.

To get a reduction in past tax, you need to appeal to the Director of Excise and Taxation.

Punjab Pakistan: Time and manner of property tax payment

The Government of Punjab accommodates taxpayers in many ways; a taxpayer can:

1. Pay tax on his property during the first quarter of a financial year at a 5% discount (technically, the discount is a 5% rebate);
2. Pay the tax in any branch of the National Bank of Pakistan throughout the province of Punjab;
3. Pay the tax in any available branch of the State Bank of Pakistan;
4. Pay the tax through a check drawn on a scheduled bank.

The first quarter of a financial year starts on July 1 and ends on October 31 of the same year. The Punjab government has implemented a surcharge of 1% per month on an accumulated basis after October 31. The effective date of the surcharge is July 1, 2012.

Generally, large taxpayers can get their payments turned into easy installments by the Excise and Taxation Officer of their district; however, after July 1, 2012, the payment of tax in installments is financially harmful for a taxpayer as it results in a larger total payment due to the surcharge.

Punjab Pakistan: Exemption of property tax: case of a retired public servant

The Punjab government has provided public servants with an exemption from property tax. The exemption is available for a property which satisfies the following conditions:

1. The construction is one residential house;
2. The total area is up to one kanal;
3. The owner is a retired government employee; and
4. The owner occupies the property for his residence.

The beneficiary may be a retired employee of the federal or a provincial government;

however, a person who was an employee of a corporation owned, established or controlled by the federal or a provincial government does not qualify for the exemption.

(One kanal is equal to 20 marlas or 600 square yards.)

Punjab Pakistan: Exemption of property tax: case of a widow owner

What is the exemption from payment of property tax available to a widow owner of a property?

A widow owner of a property is entitled to an exemption of Rs 12,150 from payment of property tax. This limit is subject to the share of the widow in the property and to the total amount of exemption up to Rs 12,150 out of the tax payable if the tax is more than Rs 12,150.

I am a widow and I still do not have an exemption from payment of property tax. Why?

In most cases, a widow fails to get total exemption from payment of property tax for one of the following reasons:
1.       The widow is not the owner of the property;
2.       The widow is a partial owner of the property;
3.       The tax is more than the exemption limit of Rs 12,150;
4.       The tax is for the period during which the husband of the widow was alive;
5.       The widow no longer has valid title to the property.

Procedure to apply for exemption

1 - Preparing to apply

As a widow seeking exemption from payment of Property Tax, you should note following points before applying for exemption:

1 - You must have a valid title of the property in your name. It means you have proof of ownership of the property for which tax is payable in your name;

2 - If you have only a share in the property ownership, you must have documentary evidence showing yor share in the property;

3 - You must have a CNIC showing your name and your husbands name e.g. name on CNIC may be Zahra W/O Tanveer, or Zahra Wd/o Tanveer; and

4 - You must have photocpies of the above documents before proceeding to the next step.

2 - Writing the application

After getting photcopies of necessary documents. you can proceed to prepare application for exemption as under:

1 - Place the notice of tax demand before you for essential information given on it;

2 - Address the application to the Excise and Taxation Officer;

3 - Write an application on a plain paper demanding exmption from the Excise and Taxation Officer;

4 - Note your property number from the tax demand notice and write it in the application showing property number, ward number, block number, and name of the inspector incharge if avaiable with you;

5 - Prove your status of being a widow by attaching a copy of the death certificate of your husband with the application and mentioning it as enclosure in the application;

6 - Prove your status of being an owner of the property by attaching a copy of the title documents;

7 - Attach a copy of your CNIC with the application; and

8 - Write your contact details for correspondance.

3 - Submitting the application

1 - Affix a Court fee of Rs 4 on the application; and

2 - Submit the application to the Excise and Taxation Office.

Exemption of property tax: case of a retired public servant

Punjab Pakistan: What is PT1 or Form PT1?

What is PT1 or Form PT1?

PT One, PT1, or Form PT1 is a form prescribed under the Property Tax Act of 1958. In fact, it is in the form of a register. The register is prepared from a survey of properties by the Excise and Taxation Department of the government of Punjab. When you need a PT1, you get a copy prepared from this register.

A PT1 identifies a property by a unique number allotted to the property during the survey. Therefore, you need Form PT1 when interacting with an organization which requires the identification and location of a property. Some situations where you need a PT1 are given below:

1. The SNGPL, SSGPL, and WAPDA, while installing a meter at a property, use the PT1 to identify and locate the property; and
2. Banks use the PT1 to identify and locate a property that will be mortgaged.

On a PT1, you can find the property number to identify the property, the name of the owner, the name of the tenant, the area of the property, and the annual rental value of the property, among other things.

You may also like to read:

1- Understanding your PT1 form

2- Can I download my PT1

3- How to obtain your copy of PT-1

Property Tax, Punjab, Pakistan

What is Property Tax?

Property Tax in Punjab, Pakistan

Property Tax is the tax levied under §3 of the Punjab Urban Immovable Property Tax Act of 1958. Property Tax is assessed and collected in rating areas, which are generally urban areas only. You can ascertain its amount if you know the Annual Rental Value of a property: the property's Annual Rental Value is the base of its property tax.

Who collects property tax?

The Excise and Taxation Department, Punjab, Pakistan collects property tax. The Department also performs the following additional functions:

1. Assessing and collecting all provincial taxes except Land Revenue;
2. Enforcing the prohibition of liquor, intoxicants, and narcotics;
3. Enforcing other public health measures designed to suppress and regulate the movements of dangerous drugs and narcotic substances.

What is the scope of property tax?

The Punjab government has levied property tax only on buildings and land within the boundaries of rating areas, which are sizable towns only. For a clear legal definition of “rating area”, one may see §§ 116 and 117 of the Punjab Local Government Ordinance of 2001.

What is the base of property tax?

The property tax base is the Annual Rental Value of a property or land. Property tax is 20 or 25 percent of the Annual Rental Value of a property or land.

You can calculate the Annual Rental Value of a property using its monthly rent or monthly notional rent. For example, if a property has monthly rent or monthly notional rent of Rs 2,000 per month, its Gross Annual Rental Value is Rs 24,000, that is, Rs 2,000 x 12.

The Annual Rental Value is 90% of the Gross Annual Rental Value. It is the amount left when you deduct a 10% rebate for repairs from the Gross Annual Rental Value. For example, if the Gross Annual Rental Value is Rs 24,000, the Annual Rental Value is Rs 21,600: Rs 24,000 minus 10% of Rs 24,000 or Rs 2,400.

It is important to remember that the assessing officer who assesses a property for property tax purposes uses the monthly rent or monthly notional rent to calculate the property's Annual Rental Value. Monthly notional rent is an estimated rent per square foot of building (or per square yard of land).

How can you calculate property tax?

Property tax is 25% of the Annual Rental Value when the Annual Rental Value is above Rs 20,000 and 20% otherwise. For example, if the Annual Rental Value is Rs 21,600, property tax is Rs 5,400.

Who pays property tax?

One important point to note is that the tax is on property, not on a person. However, it is payable by the property owner. The government may collect property tax from the tenant or possessor of a property if the owner fails to pay the tax, e.g. if he is not in Pakistan, willfully avoids payment of the tax or contact with tax collectors, etc.

What measures can the Excise and Taxation Department take to recover property tax from you?
If you have any questions pertaining to property tax, feel free to ask.

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Property Tax, Punjab, Pakistan: All the roles