Extra incomes from past land sales can be legalised by paying 15% tax

Incomes from land sales over deed value during the past five years can now be legalised by paying a 15% tax as the revenue authorities plan to bring undeclared proceeds from property sales into the formal economy.  

According to sources at the finance ministry and the National Board of Revenue (NBR), the excess amount received from selling land or apartments over the deed value will be considered capital gain and taxed at a flat rate of 15%. This benefit will apply to income from the past five years.

Under current regulations, if someone declares such additional income from a land sale in the tax file for the year following the transaction, they can pay 15% tax to legalise it. However, there is no specific provision to declare income from land sales of the previous five years. With the introduction of this new rule, income from land or apartment sales over the past five years can be regularised by paying 15% tax.

NBR officials noted that, in practice, it is very rare for people to legalise such income through regular tax payments. As a result, large amounts of money remain undeclared and outside the mainstream economy.

Snehasish Barua, a tax expert and managing partner at Snehasish Mahmud and Company, told The Business Standard, "While a relief, the core issue of mismatched mouza and transaction values remains. Real solutions demand aligning these values and reducing overall transaction costs.

"The NBR is working on it, but other stakeholders must join in, tackling both simultaneously."