Exemption Under Section 236C of the Income Tax Ordinance, 2001, Advance Tax on Sale or Transfer of Immovable Property 

 

Under Section 236C of the Income Tax Ordinance, 2001, advance tax is normally collected from the seller at the time of sale or transfer of immovable property. However, the law provides an important exemption for certain persons related to Pakistan Armed Forces and Government service, subject to specific conditions.

This exemption is given through the proviso to Section 236C(1), which states that advance tax shall not be collected in particular cases where the property was allotted by the Government in recognition of services or sacrifice.

Who can claim exemption under section 236C Advance tax will not apply to the seller if the seller is:

- A dependent of a Shaheed of Pakistan Armed Forces

- A person who dies while in service of Pakistan Armed Forces

- A person who dies while in Federal Government service

- A person who dies while in Provincial Government service

- A war-wounded person

- An ex-serviceman

- Serving personnel of Pakistan Armed Forces

- Ex-employees or serving personnel of Federal or Provincial Government

This exemption is only available when the property was given by the Government as a benefit for service, sacrifice, or martyrdom.

Conditions for exemption

The exemption under Section 236C is allowed only if all the following conditions are satisfied:

1. First sale of property :  The exemption applies only on the first transfer of the property. 

2. Property allotted by Government or Authority The property must be allotted by:

- Federal Government

- Provincial Government

- Development Authority

- Housing authority or any authorized allotment authority

3. Allotment in recognition of services The property must have been allotted:

- In recognition of services rendered, or

- As a benefit for martyrdom, injury, or government service

 

4. Certificate from allotment authority

The seller must provide proof that the property was officially allotted for the above reason. If these conditions are met, advance tax under Section 236C(1) shall not be collected at the time of transfer.

 

Practical example

If a plot is allotted by the Government to the family of a Shaheed soldier and the family sells the plot for the first time, then the registrar will not collect advance tax under Section 236C(1), provided the allotment certificate confirms that the plot was given in recognition of service.

However, if the same property is sold again later, the exemption will not apply. 

Important points to remember

- Exemption is only for first sale

- Property must be government allotted

- Proof of allotment is required

- Exemption applies only to specified persons