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People may have to pay three times higher advance income tax on compensation they receive against acquisition of their immovable property, mainly land, by the government and other agencies.
Finance minister AHM Mustafa Kamal proposed the increase in AIT in the budget proposals for the fiscal year 2020-2021 through amending the Income Tax Ordinance-1984.
The proposed rate of AIT on compensation against acquisition of immovable property will increase to 6 per cent from the existing 2 per cent if the property is situated in any city corporation, municipality or cantonment board.
The proposed rate will increase to 3 per cent from the existing 1 per cent for property located outside of the above mentioned areas.
Officials of the National Board of Revenue said that the increased tax rate would come into effect from July 1 if the proposal was passed with the Finance Bill 2020 in the parliament.
They said that they proposed the hike in AIT on compensation against acquisition in line with the increase of compensation for acquisition.
The government in 2017 increased the compensation for land by up to three times the market value of the land.
According to the Acquisition and Requisition of Immovable Property Act2017, the affected persons will get additional 200 per cent compensation against the existing market price of the land if it is acquired by any government agency.
The affected persons will get an additional 300 per cent compensation if the property is acquired by a private organisation, it said.
AIT collected under the provision is considered to be minimum tax and nonrefundable.
The new rates will increase the tax burden on common people, in most cases on poor people in rural areas, as the government mostly acquires land across the country for developing roads and other physical infrastructure.
The officials said that although such a move was not justifiable considering the financial status of the affected persons, the NBR took the decision to increase its revenue collection.
In many cases, the affected persons — with the help of officials involved with giving the compensation — receive higher compensations through exaggerating the value of establishments, crops and trees on the land, they said.
