Income tax on the compensation amount of immovable properties acquired by the government is likely to be tripled in the upcoming fiscal year.
In the proposed Finance Bill-2020, the rate of Advance Income Tax or AIT has been raised to 6.0 per cent from the existing 2.0 per cent if the property is situated in any city corporation, municipality or cantonment board.
With this, the people may have to pay three times the tax on the damages of what they would receive from the government or other agencies against the acquisition of their immovable properties, mainly land.
For immovable property located outside the urban jurisdiction, the tax rate, however, is likely to go up to 3.0 per cent from the existing 1.0 per cent.
The increased rate may come into effect from July 01, 2020 if the bill is passed by the parliament.
Officials said the upward adjustment has been done after the government hiked the amount of compensation for land acquisition.
In 2017, the government tripled the compensation for acquisition of land compared with the market value of the property.
As per Acquisition and Requisition of Immovable Property Act- 2017, the affected persons will get additional 200 per cent compensation of the existing market price of land if the land is acquired by any government agency.
Affected persons will get additional 300 per cent compensation if the property is acquired by private organisations, it said.
However, the AIT will be considered to be minimum tax and non-refundable as per the Income Tax Ordinance-1984.
Such measures are believed to increase the tax burden on the affected people.
The rural and poor people would be the worst-affected as tax would be deducted at source by the government or other agencies from their compensation amount.
In most of the cases, the government acquires land for economic zones, developing roads and constructing other physical infrastructure.
