| Islamabad: The Federal Board of Revenue (FBR) has announced that agricultural properties, excluding farmhouses, will not be subject to taxation under Section 7E of the Income Tax Ordinance 2001, according to news published in the national dailies on August 17.
Read: FBR adopts LHC verdict: Section 7E exemptions extend to Lahore jurisdiction
In Circular No. 3 of 2023, the FBR has clarified the application of Section 7E to farmhouses. Agricultural properties owned by individuals engaged in agriculture activities will not fall under the provision of Section 7E of the Ordinance, except for farmhouses and the attached land constructed on agricultural land.
Furthermore, if the immovable property under sale or transfer is an agricultural property (excluding farmhouses) and is evidenced through proper property documents, the transferring authority will execute the transfer without requiring evidence of tax payment under section 7E or Form-A, as per Circular No. 01 of 2023-24.
However, if a property includes one or more farmhouses constructed on agricultural land, the conditions outlined in Circular No.1 of 2023-24 will apply to such farmhouses after necessary adjustments.
Read: FBR announces tax relief for overseas Pakistanis on transfer of immovable properties
Therefore, the definition of a farmhouse, according to the FBR, refers to a house built on a minimum area of 2,000 square yards with a covered area of at least 5,000 square feet. It is used as a single dwelling unit with or without an annex. In cases where there are multiple dwelling units in a compound and the average compound area is greater than 2,000 square yards for each dwelling unit, each of these units will be considered a separate farmhouse. |
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