The Federal Board of Revenue (FBR) will collect advance income tax on goods and properties sold through public auctions and tenders during Tax Year 2027.
Under Section 236A of the Income Tax Ordinance, 2001, successful bidders are required to pay advance tax when purchasing goods or properties through public auctions or tenders. These provisions apply from July 1, 2026, to June 30, 2027.
Who Must Pay Advance Tax on Property Auctions?
Advance tax under Section 236A is collected from successful bidders purchasing goods or properties through public auctions or tenders.
The provision covers assets belonging to:
- Federal and provincial governments.
- Local governments and public authorities.
- Companies and other organisations.
- Foreign contractors, consultants and consortia.
- Other persons or entities.
It also applies to confiscated or attached goods and properties, regardless of ownership.
How Is Advance Tax Calculated and Collected?
The person conducting the public auction or tender is responsible for collecting advance tax from the successful bidder.
The tax is calculated on the sale price of the goods or property at the rate prescribed under Division VIII of Part IV of the First Schedule to the Income Tax Ordinance, 2001.
Where payment is made in instalments, advance tax must be collected with each instalment rather than entirely at the initial stage.
Does Advance Tax Apply to Property Leases?
Yes. Section 236A also treats the award of a lease as a sale of property for advance tax purposes. This includes leases that grant the right to collect tolls, fees and other levies.
However, advance tax collected on leases involving the right to collect tolls is treated as final tax under Section 236A(3).
The provision also covers the renewal of licences previously awarded through public auctions or tenders.
Can Buyers Adjust the Advance Tax?
Generally, advance tax collected under Section 236A can be claimed as credit against the buyer’s income tax liability for the relevant tax year, subject to Section 147 and other applicable provisions.
Buyers should retain auction documents and tax payment evidence to support their tax records and adjustment claims.
How Xact Legal Can Help
Property auctions and tender transactions can involve important tax obligations. Understanding advance tax requirements helps buyers plan their payments and maintain proper tax compliance.
Xact Legal provides professional tax advisory and compliance services, including:
- Advance tax guidance.
- Income tax return filing.
- Tax planning and advisory.
- Tax adjustment assistance.
- FBR compliance and related matters.
Contact Xact Legal for professional guidance on advance tax obligations for property auctions and tenders in Tax Year 2027.
Frequently Asked Questions
1. Which section covers advance tax on property auctions?
Section 236A of the Income Tax Ordinance, 2001, governs advance tax on goods and properties sold through public auctions or tenders.
2. Who collects advance tax on auctioned property?
The person conducting the public auction or tender is responsible for collecting tax from the successful bidder.
3. Is advance tax collected on instalment payments?
Yes. Where payment is made in instalments, advance tax is collected with each instalment.
4. Does Section 236A apply to property leases?
Yes. It also covers the award and renewal of certain leases, including rights to collect tolls, fees and other levies.
5. Is advance tax on auction purchases adjustable?
Generally, yes. It can be credited against the buyer’s income tax liability, subject to applicable legal provisions. Tax collected on leases involving the right to collect tolls is treated as final tax.
Conclusion
Section 236A establishes advance tax obligations for buyers purchasing goods and properties through public auctions and tenders in Tax Year 2027. Buyers should understand the applicable collection and adjustment rules before completing auction transactions.
Disclaimer: This article is for general information only and should not be treated as legal or tax advice. Consult a qualified tax professional for guidance on your circumstances.