Some relief in tax on land acquisition compensation

The National Board of Revenue (NBR) is set to provide some relief to landowners in the existing income tax on compensation for land acquisition by the government.

Currently, a source tax is levied at rates of 6% and 3%, respectively, on the compensation received for the acquisition of property, depending on the area.

However, the tax on it as a capital gain is 15%. Consequently, landowners are required to pay an additional tax of 9% and 12%, respectively, on the compensation.

Nevertheless, the Income Tax Department of the NBR is planning to designate the tax deducted at source as a final settlement. This implies that, apart from the tax initially deducted at source at 6% and 3%, no additional tax is payable on that income.

According to a relevant source in the tax department, all preparations have been completed to issue an order called a Statutory Regulatory Order in this regard, and it will be published soon.

"This will result in tax relief for those who receive compensation for land acquisition," an NBR official told The Business Standard.

According to the Income Tax Act of 2023, in the case of city corporation, municipality, and cantonment board areas, the source tax is 6% of the compensation for the acquisition of immovable property, and in other areas, it is 3%.