Land buyers have to specify fund sources: NBR

Taxpayers will have to explain the sources of their income while making a land purchase, said the National Board of Revenue.

The waiver from explaining the sources of funds is applicable only to investments in buildings or apartments, the NBR said in a notice on April 6.

The clarification from the tax authority comes after it had come to know that some individuals sought waiver from mentioning the sources of their income while purchasing small buildings on a big expanse of land.

"We have come to know from our field offices that there have been attempts of non-disclosure of sources of incomes for investment in land. So, we have issued the clarification," a senior official of NBR said, seeking to remain unnamed.

In July 2013, the government offered amnesty from explaining the sources of funds in the tax returns for investment in residential buildings and apartments by inserting a provision in the Income Tax Ordinance 1984.

Taxpayers can take advantage of the provision by paying a certain amount of taxes on the basis of location.

The privilege was given to 'encourage' investment in private housing and prop up the stagnant real estate sector, according to Finance Minister AMA Muhith's budget speech.

The NBR, in its clarification, said taxpayers will not require explaining the sources of investment for construction of residential buildings on the purchased lands.

"But taxpayers must mention the sources of invested funds for land purchase separately," said the tax administration in its clarification.

In case of purchase of land including residential buildings, the NBR said taxpayers can be able to get waiver from mentioning the sources of invested funds if the registered value of the residential buildings stands equal or higher than the registered value of land.

If the registered value of land is higher than the recorded prices of a building, taxpayers will not get amnesty from explaining the sources of income, the NBR said.

The official said they have got information that a section of taxpayers have bought a large chunk of lands, including a building on the purchased plot.

"Now, they seek waiver from explaining the sources of income claiming that they have bought the residential building, not land. We are not going to allow this."