Mohsin Siddiqui (Chief Reporter)

The Federal Board of Revenue (FBR) has announced significant changes to withholding tax (WHT) provisions related to the sale and purchase of immovable property, motor vehicles, and salary income. These changes, outlined in a notification dated July 1, 2024, require all chief commissioners of Inland Revenue (IR) to monitor deductions according to the revised sections of the Finance Act 2024.

The notification details new withholding tax rates under Section 236C for the sale of immovable property, with varying rates based on the taxpayer’s status as a filer, late filer, or non-filer. For filers, the WHT rates are 3% for amounts up to Rs50 million, 3.5% for amounts exceeding Rs50 million, and 4% for amounts over Rs100 million. Late filers face increased rates of 6%, 7%, and 8% respectively, while non-filers are subject to a flat rate of 10%.

The notification introduces a new category for late filers—those who appear on the Active Taxpayers List (ATL) but have not filed their returns by the extended due date. These provisions do not apply to individuals who have filed returns by the due dates specified in sections 118, 119, or 214A for the last three tax years preceding the current tax year.

Under Section 136K, similar distinctions are made for the purchase of immovable property. Filers will be charged WHT rates of 3%, 3.5%, and 4% based on the fair market value thresholds of Rs50 million, Rs100 million, and amounts exceeding Rs100 million. Late filers will pay 6%, 7%, and 8%, while non-filers face significantly higher rates of 12%, 16%, and 20%.

Regarding motor vehicles, Section 213B has been amended to reflect different tax rates based on engine capacity and the taxpayer’s status as a filer or non-filer. For filers, the rates range from 0.5% for vehicles up to 850cc to 12% for vehicles above 3000cc. Non-filers face higher rates, starting at 1.5% and reaching 36% for the highest engine capacities.

The revised withholding tax provisions also address salary income. There is no tax on income up to Rs600,000. For income between Rs600,000 and Rs1,200,000, the rate is 5%. Higher income brackets are taxed at progressively higher rates, with a top rate of 35% on income exceeding Rs4,100,000.

sections 236G and 236H, which previously applied to specific sectors, have been omitted. Now, manufacturers, commercial importers, wholesalers, dealers, and distributors must deduct tax irrespective of the sector.

These changes aim to enhance tax compliance and ensure a more equitable tax system. Taxpayers are encouraged to review their status and ensure timely filing to avoid higher withholding tax rates.