No withholding tax on Hiba, gift deeds: NBR

The National Board of Revenue (NBR) has clarified that no withholding tax will be imposed on Hiba (gifts under Islamic law) and gift deeds, ending confusion that had disrupted property registrations at sub-registrar offices.

In a clarification issued on Tuesday, the revenue authority said registration of Hiba and gift deeds will require only the payment of the applicable gift tax or stamp duty under existing laws. No withholding tax will be collected in such cases.

The NBR said that while Section 125 of the Income Tax Act, 2023 and the Withholding Tax Rules, 2026 require payment of prescribed taxes before the registration of property transfers, there is no legal provision imposing withholding tax on property transferred through Hiba or gift deeds.

The clarification also states that from FY2026-27, submission of Dakhak (Form-59) has been made mandatory for the registration of Hiba and gift deeds. 

Registering authorities will collect the form from the donor but will not collect withholding tax. Instead, they will verify that the applicable gift tax or stamp duty has been paid in accordance with the law.

The move follows confusion over the wording of the new Income Tax Act and the Income Tax Rules, which led several sub-registrar offices to temporarily suspend the registration of Hiba and gift deeds as officials were uncertain whether withholding tax was payable in addition to gift tax.

A Hiba is a voluntary transfer of movable or immovable property without consideration from one person to another. 

Recognised under the Transfer of Property Act, 1882, it is commonly used in family, religious and social contexts rather than commercial transactions.

The ambiguity had led many to believe that, in addition to gift tax, a minimum withholding tax of 2% or Tk500 per decimal of land would also apply to Hiba and gift deeds. 

In city corporation areas, concerns were raised that the withholding tax could reach 5% of the property’s value or as much as Tk9 lakh in some cases.

The latest clarification removes that uncertainty.

Under the new rules, the prescribed tax on property transfers must be deposited into the government treasury through a separate e-Challan before registration, and proof of payment must be submitted with the registration application. 

The existing schedule-based tax structure, determined by the property’s location, classification and type, will remain unchanged.