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Finance Act 2016-17 | Property tax rates in Pakistan
FBR will determine the real estate
prices | 2-10 times increase in property valuation rate
In Pakistan rates of immovable properties were decided by the commissioner. Stamp duty and other property taxes were subjected according to the DC rates. Now according to Finance Act 2016 it has been changed. Now properties will be evaluated by Federal Board of Revenue, FBR. Now all property taxes will be subjected to new property rates set by FBR. All parties agreed to hike 2-10 times the property valuation rate. The parties further agreed to bring rates closer to fair market value in few years.
Withholding tax (WHT)
WHT THRESHOLD
The government / FBR has increased the withholding tax threshold. According to new taxes, withholding tax (WHT) will be applicable on properties worth 4 million rupees, instead of 3 million rupees. Withholding period has also been increased to 5 years.
WHT FOR SELLERS OF IMMOVABLE PROPERTY
1% WHT on sale of property for filers
2% WHT on sale of property for non-filers
0% WHT on sale of properties after 5 years of purchase
WHT FOR BUYERS OF IMMOVABLE PROPERTY
3% WHT on purchase of property for filers
4% WHT on purchase of property for non-filers
Capital Gain Tax (CGT) on immovable property
CGT ON PROPERTY TRANSACTIONS BEFORE I JULY 2016
For past transactions, 5% CGT is applicable on all properties purchased before 1 July 2016 and sold out within 3 years.
CGT ON PROPERTY TRANSACTIONS AFTER 1 JULY 2016
10% CGT on sale of properties within 1 year of purchase
7.5% CGT on sale of properties within 2 years of purchase
5% CGT on sale of properties within 3 years of purchase
No CGT on sale of properties after 3 years of holding period
No CGT is applicable on the plots of the Martyrs / Shuhadas
50% tax relaxation for the government employees
CGT CALCULATOR
Profit on sale of immovable property = Capital Gain
Capital Gain = Price of property at the time of sale – Price of property at the time of purchase
Capital Gain on property sold for 100 Lac with purchase value 20 Lac
Capital Gain = 100-20 = 80 Lac Profit
Tax on property profit = Capital Gain Tax = CGT
According to new CGT calculations | On profit of 80 Lac
10% CGT on sale of property within 1 year of purchase = 8 Lac
7.5% CGT on sale of property within 2 year of purchase = 6 Lac
5% CGT on sale of property within 3 year of purchase = 4 Lac
0% CGT on sale of property after year of purchase = 0
(Property price is not what the market value is but the price determined by FBR. At the moment FBR will start taxing real estate transactions according to 50% plus minus of the fair value of property – But in future like 3-4 years time all taxes will be according to the original value of the property AKA FAIR MARKET VALUE)
Tax on rental income
According to Pakistan real estate tax 2016, no tax is applicable on rental income if the total amount is less than Rs 200.000 per year and owner has no other source than rental income. The rental income of Rs 200,000 or above is to be taxed. Tax slab on rental income is:
Annual rental income 2-6 Lac = 5% of the gross amount
Annual rental 6-10 Lac = Rs 20,000 plus 10% of the gross amount
Annual rental 10-20 Lac = Rs 60,000 plus 15% of the gross amount
Annual rental above 20 Lac = Rs 210,000 plus 20% of the gross amount
Tax on incomes of builders & developers
According to new property tax law in Pakistan, income of developers is subject to taxation. Taxes will be collected from builders according to the rates fixed for different cities. According to new rates, builders have to pay per foot rate for commercial and residential pro