The Federal Board of Revenue (FBR) will not impose tax on agricultural properties, except for farmhouses, as per section 7E of the Income Tax Ordinance 2001.
In circular number 3 of 2023, the FBR clarifies that the exclusion of farmhouses and attached land on agricultural grounds, along with self-owned agricultural property engaged in farming activities, falls outside the scope of section 7E of the Ordinance.
Consequently, when selling or transferring agricultural property that doesn’t include farmhouses, documented as per property records, the transfer process will not require evidence of tax payment under section 7E or Form-A from the seller or transferor, as outlined in Circular No. 01 of 2023-24.
However, if one or more farmhouses are present on agricultural property, the conditions detailed in Circular No.1 of 2023-24 will apply accordingly, with necessary adjustments, according to the FBR.
The definition of a farmhouse entails a minimum area of 2,000 square yards with a covered space of 5,000 square feet. It functions as a single dwelling unit, with or without an annex. In cases where multiple dwelling units exist within a compound with an average area exceeding 2,000 square yards, each unit is considered a separate farmhouse, the FBR elaborated.