Flat-plot registration has decreased with tax hike !

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The National Board of Revenue (NBR) has doubled the property registration tax across the country including Dhaka. In case of transfer of immovable property or land-flat in any part of the country, the buyer has to pay double tax on acquisition of ownership. NBR has fixed this new tax in the tax rules at source under the ‘Income Tax Act-2023’.

The sale of plots and flats has decreased in major cities of the country including Dhaka due to increase in registration tax. Buyers are also losing interest in registration. As the income tax collection is decreasing abnormally, the government’s revenue collection target is also getting a big blow. In this situation, those concerned with the housing sector are talking about withdrawing the increased registration tax.

After stumbling in revenue collection in the first two months (July and August) of the current (2023-24) financial year, the NBR is already planning to reduce tax at source on registration of plots and flats. Earlier, land registration tax was 4 percent of the contract value. It has been increased to 8 percent in the 2023-24 budget. According to the sources concerned, the registration tax may go back to the previous rate (4 percent). The final decision may come after the meeting of the higher authorities of the Board of Revenue.

The target of revenue collection for the current financial year has been set at Tk 430,000 crore. In the first month of the financial year, July, against the target of 7,281 crores, income tax was collected at 5,213 crores. Decline in plot and flat registration is seen as the reason for not meeting the target.

It was found that the target of income tax collection could not be achieved due to decrease in plot and flat registration. Plot or flat registration is carried out at 17 government registration offices in and around the capital Dhaka. The contract price or revenue is deducted from the registration in these offices. In those 17 offices, only 32 crores of tax was collected for land or flat registration in July, which is 69 crores less than the same period of last financial year. The amount of registration tax in July of FY 2022-23 was Tk 101 crore.

The government has set a target of Tk 4,700 crore for the current fiscal year. However, the rate at which taxes are being collected has raised concerns and uncertainty about achieving the target. In the last one month and 24 days, i.e. from July 1 to August 24, the registration tax has been collected at Tk 108 crore, which is only 2.2 percent of the target. The matter is of great concern to the policy makers of NBR.

According to the Real Estate and Housing Association of Bangladesh (REHAB), comparatively more plots are sold in different housing projects around the capital’s Gulshan, Banani, Dhanmondi, Baridhara, DOHS, Uttara and Dhaka. In addition to registration tax, the buyer has to spend an additional 13-14 percent due to the increase in other taxes including gain tax. Earlier it was 10 percent. Earlier, if the price of a plot or flat was Tk 1 crore, the buyer had to spend Tk 1 crore 10 lakh in various taxes, which has now increased to Tk 1 crore 14 lakh.

Besides, there are also variations in registration tax depending on the place or area. For example, in Gulshan and Banani areas, Tk. 20 lakhs or 8 percent of the contract price – whichever is higher – is levied as tax. This tax is the highest of any residential area in the country. If a buyer buys a plot of five kathas in Gulshan, then that buyer has to pay tax of at least 1 crore taka.

According to Rehab sources, 10-15 thousand flats are handed over on an average in the country every year. Among them, about eight thousand flats are bought and sold in Dhaka city and surrounding areas. However, due to the doubling of registration tax, there has been a decline in flat sales since last June.

When asked about this, Rehab vice-president Kamal Mahmud said, “When NBR took this decision, we informed that it will reduce the revenue collection. That’s what happened. Now there is a collapse in flat registration and transfer.

Rehab Director Engineer Al-Amin said flat registrations have decreased a lot after the budget was announced. Land trading has also decreased. We are in regular contact with the registry office. Earlier, when I went there, I used to see a line of people coming for registration, now that is no more. Land registries are greatly reduced. It has also reduced the collection of government revenue. NBR may have plans to increase revenue collection by raising or doubling the 4 percent registration tax to 8 percent. But that didn’t happen, on the contrary, it was the opposite. This decision played a negative role.

He also said that in the last two months, the registration of plots and flats has decreased by almost 60 percent. As I said before, increasing the tax rate will reduce the registration. That’s what happened in the end.

A senior official of the Board of Revenue has admitted that the sale of land and flats has decreased significantly due to the increase in registration costs. The official, who did not wish to be named, said that tax at source was increased to increase income tax collection. But the result is opposite. Reduction of tax at source is being considered in this sector. It may return to the previous rate (4 percent).

Those concerned say that the prices of land and flats are increasing rapidly. The price of construction materials has skyrocketed. In this situation, the additional tax on land or flat registration is like a ‘slap on the back’. The Board of Revenue realized this fact a little late.

Senior economist Mashroor Riaz thinks that theWith the kind of challenges that the US economy is going through, naturally, the increase in tax rates will reduce the buying and selling of land or flats. Our informal economy is still very large. Because, people do not want to come under Karzal. Now, if the tax rate is increased, then those who are in the net or want to come in the net through the formal economy in the transaction of land or flats, they will be discouraged again.

Rehab Director Engineer Al Amin said that if the increased tax rate is not withdrawn and returned to the previous place, the government will suffer a big blow in revenue collection as well as the housing sector.

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