Property Tax, Punjab, Pakistan: All the Roles

Roles in Property Tax Collection and Assessment

To get a good grasp of property tax, it's very important to understand the various roles in its collection and assessment. Once you have a clear picture of these roles in your mind, you will be able to understand your rights and responsibilities in relation to your properties. Let's start with some Q&A to outline these roles.

Who Assesses Property Tax?

The Assessing Authority assesses property tax. The role of the Assessing Authority is filled by the Excise and Taxation Officer (ETO). He performs this role under the provisions of the Punjab Urban Immovable Property Tax Act, 1958. It is important to note that this is not the only role which an Excise and Taxation Officer performs; his other roles include Registering Authority for registration of motor vehicles, Assistant Collector, etc.

As the Assessing Authority, the ETO assesses properties for levying property tax. The value determined by the assessment he makes becomes the basis of property tax on the assessed properties. That is, for a given tax rate (e.g. 20%), the value to be taxed is the value determined by the Assessing Authority, i.e., the Excise and Taxation Officer (ETO).

Who Collects Property Tax?

The Assistant Collector collects property tax. The role of Assistant Collector is again filled by the Excise and Taxation Officer under the provisions of the Punjab Urban Immovable Property Tax Act, 1958. While performing his role as an Assistant Collector, the ETO has the power to arrest defaulters, implement orders to seal properties, etc.

Who Pays Property Tax?

The owner of a property pays property tax. In general, this is the sole responsibility of the owner, but there are exceptions. A tenant of a property must pay property tax if he is directed by the Excise and Taxation Officer to do so. However, the tenant has the right to deduct the property tax he pays from the rent payable to the owner. Similarly, there are situations when a possessor of a property or any other party interested in the title of the property may pay property tax.

Who Gets Property Tax?

The local government gets property tax collected by the Excise and Taxation Department. The local government spends this collected tax money on sanitation, street lights, and other local needs.

Who Hears Property Tax Appeals?

The Director of Excise and Taxation hears appeals against assessments made by Excise and Taxation Officers. If a person feels his property has been given an unfairly high assessment, he may file an appeal in the court of the Director of Excise and Taxation. The Director hears the versions of both the ETO and the taxpayer and makes a decision. He may also have his staff inspect the assessed property, or may inspect the property himself.

Who Hears Property Tax Revisions?

The Executive District Officer (EDO) hears Property Tax revisions. (A property tax revision disputes the decision on an appeal made by the Director of Excise and Taxation.)

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Property Tax, Punjab, Pakistan.

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Punjab, Pakistan: How to obtain a copy of your PT1

You can obtain a copy of the PT1 for your property from the Excise and Taxation Office of your district. The application to obtain the copy is addressed to the Excise and Taxation Officer of the district. However, the Excise and Taxation Officer is not the person who will hand you the copy of the PT1, because the record pertaining to your property is in custody of the clerk or the inspector in charge of your ward, circle, or block. Generally, a clerk makes a copy of the record PT1 for delivery to you.

The following is a simplified outline of the procedure to obtain your copy of the PT1:

1. Write an application to the Excise and Taxation Officer on plain paper. The application should clearly show the property number, ward, block, or circle, and locality where the property is located. You may also fill up a standard application form, which can be obtained from the stamp vendors sitting outside the Excise and Taxation Office, or from the Excise and Taxation Office itself;

2. Affix a court fee of Rs 20 to the application;

3. Submit the application to the Excise and Taxation Office;

4. Obtain your copy of the PT1 the next day, i.e., after one day.

Note that your application may be rejected if tax has not been paid on your property, or for various other reasons. In addition, the copy you receive may lack the necessary amendments and thus not be useful to you. In such a case, you will have to submit an application for amendment of the record PT1 before applying for another copy. Processing of an application for amendment of the record PT1 takes more than two weeks, due to required verifications and confirmations. Once you have got the record PT1 amended, the procedure to obtain a copy is as simple as above.

One important point to note is that, while the court fee for obtaining a copy of the PT1 is only Rs 20, the property tax on the property may be much higher – even several hundred thousand rupees for a large property such as a plaza – and you may have to pay the tax before obtaining your copy of the PT1!

The Excise and Taxation Office is not accepting the property number I have stated on my application for a PT1. Why not?

The Excise and Taxation Department uses its own numbering system to identify properties and the associated property tax. It does not have information on numbering systems used by other organizations and departments. For example, a housing society uses its own plot numbering to develop and sell plots. The numbers used by the housing society may or may not coincide with the numbers allotted by the Excise and Taxation Department. You will have to use the Excise and Taxation property number when obtaining your copy of the PT1.

The Excise and Taxation Department marks its property number in red on the properties in each rating area. Therefore, you may find the red number marked on your property and use this in your application.

You may also like to read:

Understanding your PT1 form

What is PT-1 or Form PT-1?

Online Propert Tax Calculator

Punjab, Pakistan: Penalty on delayed payment of Property Tax

Penalty

The Excise and Taxation Officer (ETO) may impose a 100% penalty on an outstanding tax amount. If a taxpayer fails to pay property tax by the due date on the notice of tax demand, the ETO may recover from him a penalty not exceeding the amount of outstanding tax. However, the ETO cannot impose such a penalty unless he is satisfied that the taxpayer has willfully failed to pay the tax.

Surcharge

The government of the Punjab has imposed a surcharge on delayed payment of property tax. The surcharge applies to the outstanding balance of property tax @ 1% per month and is calculated with effect from 01.07.2012. If a person has no property tax arrears, he can make the following payments, with the corresponding penalty or rebate, during a financial year:

Month Original Tax Penalty, or (Rebate) Payable July 100 (5.00) 95.00 August 100 (5.00) 95.00 September 100 (5.00) 95.00 October 100 1.00 101.00 November 100 2.02 102.02 December 100 3.06 103.06 January* 100 4.12 104.12 February 100 5.21 105.21 March 100 6.31 106.31 April 100 7.44 107.44 May 100 8.60 108.60 June 100 9.77 109.77

* New calendar year starts here.

Punjab, Pakistan: Understanding your PT1 form

Understanding Your PT1 Form 

A PT1 form is a description of your property in a standard 18-column format. Every property unit has its own PT1; it is possible for your property to be non-taxable and still have a PT1. The important thing is that a property has a PT1 if the property is in an urban area and the urban area is a notified rating area.

The headings of the 18 columns which describe your property are:

1.   Serial No.;

2.   Name or number of the subdivision/mohallah/street where the property is situated;

3.   Designation of the property by name, number, type of building, etc.;

4.   Name, parentage, caste, and residence of the owner;

5.   Name, parentage, caste, and residence of present occupier;

6.   Total area of the site or land;

7.   Size of the building according to the plinth area;

8.   Number of storeys;

9.   Number of rooms etc.;

10. Present condition of the building;

11. Site rent, if any, payable by the owner of a building;

12. Details of land not occupied by a building;

13. Gross annual rental value assessed;
14. Deduction;

15. Proposed net annual value;

16. Annual value fixed in pursuance of any objection;

17. Annual value fixed in pursuance of any appeal; and

18. Remarks.

1. Serial Number

The PT1 of your property is a copy of ONE entry in the PT1 register maintained by the Excise and Taxation Department. The first column in the register is the serial number, and the copy of the PT1 available to you also has this serial number; the PT1 of your property that you are holding in your hand is a true copy of the corresponding entry in the PT1 register.

2. Location of the Property

The government levies tax on properties in a rating area. However, the government does not impose tax on a rating area in the aggregate; it breaks the rating area down into smaller, more manageable subdivisions. Further, each subdivision is divided into circles, blocks, or wards for better management of property tax collection in the rating area. This column may also show other information about the location of the property, e.g., mohallah, street, etc.

3. Designation of the property

Column 3 of the PT1 shows the property unit number. The property unit number is a unique number assigned to the property by the Department when it assesses the value of the property. It often remains the same over time.

4. Owner information

This column gives the details of property ownership. It not only provides names of the owners, but also gives their parentage. For example, it may show the name as “Muhammad Irfan S/O [son of] Muhammad Irshad”. The residence (address) of the owner is often not recorded in this column, because the property has a particular traceable address.

5. Occupier information

This column gives the details of tenants or occupiers of the property. It not only provides names of the occupiers, but also gives a brief description of the portion of the property occupied by the tenants. 

6. Total Area

This column gives the total area of the property, measured in square yards. The total area together with the covered area in column 7 defines the size of the property.

7. Covered Area

This column gives the covered area of the property, measured in square feet. The covered area of a property defines the size of the building on the total area of the property. The covered area together with the total area in column 6 defines the size of the property.

8. Number of Storeys

Column 8 gives the number of storeys of the property. A building may have a single storey, or be double storey, third storey etc. 

9. Number of Rooms

This column gives the details of the building, e.g., number of rooms, shops, halls, garage etc.

10. Condition of the building

This column gives the condition of the building. It classifies buildings into three categories: poor, good, and average.

11. Site Rent

A property may include land and a building. Sometimes, the owners of the land and building are not the same. For example, a person may build a shop on land leased from a local government. The site rent payable to the local government is recorded in this column, which gives the site rent paid by the owner of the building if the building is erected on land belonging to a person other than the owner of the building.

12. Land not occupied by building

This column gives the details if the land has structures other than buildings or is merely a piece of land.

13. Gross Annual Rental Value

This column gives you the Gross Annual Rental Value (GARV) of the property. The GARV is the basis for taxing the property. The higher the GARV of a property, the higher its property tax.

14. Deduction

This column gives deductions from GARV, e.g., a 10% deduction for repair.

15. Annual Value-I

This column shows net Annual Value. This is simple to calculate:
Annual Value = GARV - Deduction

16. Annual Value-II 

If a taxpayer files an objection to the proposed value in column 15 and gets it changed, the changed value is recorded in this column. An objection is filed in the court of the Excise and Taxation Officer (Assistant Collector).

17. Annual Value-III

If a taxpayer files an appeal against the proposed value in column 15 or 16 and gets it changed, the changed value is recorded in this column. An appeal is filed in the court of the Director Excise and Taxation (Collector)

18. Remarks

This column records remarks pertaining to your property. One common remark is about change of ownership in column 4.

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Can I download my PT1?

What is a PT1 or Form PT1?

Tax on Rental Income from Property in Pakistan

This post is on income tax on rental income from property or real estate.

Income from Property

Section 11 of the Income Tax Ordinance, 2001, classifies income under the following heads, namely:

(1)      Salary;

(2)      Income from Property;

(3)      Income from Business;

(4)      Capital Gains; and

(5)      Income from Other Sources.

Income from property is the second head of income.

Rent received or receivable by a person in a tax year is chargeable to tax under the head "income from property." Therefore, while assessing taxable income, a person has to account for:

(1)      The rent received during a tax year; and

(2)      The rent receivable during a tax year.

However, exempted rent is not chargeable to tax.

Rent

Rent is any amount received or receivable by the owner of land or a building as consideration for the use or occupation of, or the right to use or occupy, the land or building, and includes any forfeited deposit paid under a contract for the sale of land or a building.

Computation of Rent

Example 1

Ms. Bisma Bilal let out her building to Ms. Sidra Siddique for Rs 9,000 per month on 1^st July 2013. During the year, she received Rs 12,000 token money on a contract of sale of her house to Sidra for Rs 120,000. However, Sidra could not purchase the house and forfeited the token money.

Let us calculate rent chargeable to tax:

Tax Year : 2014
Tax Year Ended : 30-06-2014
Personal Status : Individual (Salaried Person)
Residential Status : Resident
Computation of Rent Chargeable to Tax
Particulars	Rs.
Income from Property
Rent
(Monthly Rent x 12)
(Rs 9,000 x 12)	108,000
Token Money (Forfeited amount is chargeable to tax)	12,000
Rent chargeable to tax	120,000
Tax Payable
(Taxable rent does not exceed Rs 150,000 )	Nil

Non-adjustable Advance

If the owner of a building receives from a tenant an amount which is not adjustable against the rent payable by the tenant, the amount shall be treated as rent chargeable to tax in the tax year it was received and the following nine tax years in equal proportion.

If an earlier non-adjustable amount is refunded by the owner to the tenant on termination of the tenancy before the expiry of ten years, no portion of the amount shall be allocated to the tax year in which it is refunded or to any subsequent tax year. However, if the owner lets out the building to a succeeding tenant and receives from him any succeeding non-adjustable amount, the succeeding amount minus the portion of the earlier amount charged to tax shall be treated as rent chargeable to tax. The calculation is like this:

Succeeding non-adjustable amount	108,000
Less (earlier non-adjustable amount charged to tax)	12,000
Rent chargeable to tax	120,000
Figures are included for explanation

Example 2

Mr. Raouf Roofi rented out his property to Mr. Awais Ansari for Rs. 8,000 per month on 1^st July 2012. He received a non-adjustable advance of Rs 100,000 from Mr. Ansari. The authorities assigned a fair market rent of Rs 110,000 to the property.

Let us calculate rent chargeable to tax:

Tax Year : 2014
Tax Year Ended : 30-06-2014
Personal Status : Individual
Residential Status : Resident
Computation of Rent Chargeable to Tax
Particulars	Rs.	Rs.
Income from Property
Higher of:
a.   Rent
(Monthly Rent x 12)
(Rs. 8,000 x 12)	96,000
b.   Fair Market Rent	110,000	110,000
Non-adjustable Advance
(Taxable up to 1/10 p.a.)
(Rs 100,000 x 1/10)		10,000
Rent Chargeable to Tax		120,000

Example 3

Mr. Lateef Langha let out his property to Mr. Anser Ansari at Rs 8,000 per month. Mr. Ansari vacated the property after one year on 30^th May 2014. Mr. Langha returned the non-adjustable advance of Rs 200,000, which was received at the time of negotiating the tenancy agreement, to Mr. Ansari. If the fair market rent is Rs 125,000 p.a., what is rent chargeable to tax?

Tax Year : 2014
Tax Year Ended : 30-06-2014
Personal Status : Individual
Residential Status : Resident
Computation of Rent Chargeable to Tax
Particulars	Rs.	Rs.
Income from Property
Higher of:
a.   Rent
(Monthly Rent x 12)
(Rs. 8,000 x 12)	96,000
b.   Fair Market Rent	125,000	125,000
Rent chargeable to tax		125,000

Income not chargeable to tax as rent

The following are not rent chargeable to tax:

(1)      Royalty;

(2)      Ground rent;

(3)      Rent from building let out with plant and machinery, equipment, etc.;

(4)      Rent from subletting immovable property;

(5)      Income from providing utilities or other services with immovable property;

(6)      Income from mining;

Exempted income from property

The following rents are exempt from tax:

(1)      Rent of agricultural building;

(2)      Rent of immovable property held under trust;

(3)      In a tax year, fair market rent is exempted subject to the following conditions:

(a)    The recipient is an individual or AOP;

(b)    The fair market rent does not exceed Rs 150,000; and

(c)    The recipient has no income under any other head.

Specified Tax Rates

The tax rates to be paid under the head "income from property" are:

Rates for Individuals and Associations of Persons

Sr.	Rent	Rate of tax
(1)	Rent does not exceed Rs 150,000	Nil
(2)	Rent exceeds Rs.150,000 but not Rs.400,000	5% of amount exceeding Rs.150,000
(3)	Rent exceeds Rs.400,000 but not Rs.1,000,000	Rs 12,500 plus 7.5% of amount exceeding Rs 400,000
(4)	Rent exceeds Rs.1,000,000	Rs 57,500 plus 10% of amount exceeding Rs 1,000,000

Rates for Companies

Sr.	Rent	Rate of tax
(1)	Rent does not exceed Rs 400,000	5% of the amount of rent
(2)	Rent exceeds Rs 400,000 but not Rs 1,000,000	Rs 20,000 plus 7.5% of the amount of rent exceeding Rs.400,000
(3)	Rent exceeds Rs 1,000,000	Rs 65,000 plus 10% of the amount of rent exceeding Rs 1,000,000

Transfer of Properties and Transfer Tax

Transfer of Properties and Transfer Tax

What is Title of a Property (Real Estate)?

The title of a property is the right of ownership of the property. In fact, the title of a property is a set of rights available to the owner of the property. These rights include the right to possess the property; the right to use the property; the right to let out the property; the right to sell the property; etc.
A document that shows that a person has the title of a property is called a title deed. A title deed shows the particulars of a property, including the land area, details of any buildings, nature of its use, its value, the name of the person from whom the present owner got the title, etc.

What is transfer of a property?

Transfer of a property means transfer of its title from one person to another person. For example, when Mr. B buys a property from Mr. A, the TRANSACTION OF BUYING represents TRANSFER.
Therefore,

Transaction of Buying = Transfer

Other transactions which can represent transfer include inheritance, gift, etc.

Who transfers a property?

A person who has the title of a property can transfer the title of the property to another person.

The point to note is that, in the matter of real estate ownership (and in other legal matters as well), a person is not simply a human being. The word “person” includes many entities other than human persons. Examples are companies, trusts, associations of persons, and firms. In the eye of the law, all these are persons and can have title of a property. Hence, they can also transfer title of a property to other persons.

One important requirement for property transfer is that the person transferring the property to another person must have a title of the property. Essentially, the person selling the property cannot transfer a title better than his own title. For example, a person having title of a 2,500 square foot piece of land cannot transfer 2,501 square feet of land.

Where is transfer of a property made?

When a person transfers a property to another person, the transfer is recorded in government records.

A document showing the transaction details is prepared as a copy of record available from the government as evidence of the transfer. This document is called a deed, sale deed, sales deed, registered deed, registry, or registered transfer deed.

When is a transfer of property needed?

Probably the most common time a transfer of property is needed is at the time of the property's sale. This is when a property changes hands; it gets transferred from one person to another person.

Another common time that property transfer is needed is upon the death of a person having title of a property. When this happens, the property becomes property without an owner. Generally, such properties are supposed to be transferred to the legal heirs of the deceased person. However, the transfer does not happen automatically; it needs to be entered into government records by the legal heirs.

Other times of need for property transfers include the need for transfer for the purpose of giving property as a gift, acquiring property for a project, etc.

How costly is a transfer of a property?

The transfer of property is not free; in fact, it generally involves a high cost, which varies directly with the cost of the property or real estate being transferred. The higher the cost of a property, the higher the cost of its transfer.
The cost of transfer is not included in the price of the property under transfer. That is why the total cost to buy a property is higher than the price agreed between the seller and the buyer of the property.

The transaction cost of transfer of a property includes:

1.   Transfer Fee;

2.   Stamp Duty;

3.   Capital Value Tax; and

4.   Other Taxes

In simple equation form:

Cost of buying a property = Price of the property plus transfer taxes
 
This means that taxes add to the cost of real estate for sale.

Generally, a property or real estate is subject to taxes from all three levels of governance in a country, i.e., federal government, provincial or state government, and local government.

Examples of federal government taxes include income tax on rental income arising from a property and short-term capital gains tax arising from sale of property within a short period.

Examples of provincial government or state taxes include stamp duty and registration fees.

Examples of local government taxes include fees for transfer of a property in local records and map fees.

What are the taxes on transfer of a property?

The transfer taxes on a property are collected at the time of the transaction of transfer of the property from one person to another person.

In a simple sense, the transfer taxes are transfer fees that the government collects from the persons getting the property transferred. Common names of these taxes are:

·       Transfer Fee;

·       Registration Fee;

·       Stamp Duty;

·       Notary Fee;

·       Real Estate Transfer Tax;

·       Gift Tax;

·       Gain Tax;

·       Capital Gains Tax;

·       Property Tax;

·       Estate Tax; and

·       Immovable Property Taxes