AOA
As CMY has already explained about CGT i will not be adding details to it.
But Please try to understand what exactly has changed, Many people here think that 10% CGT was not present before and it is whole new TAX.
It was there since 2014 and only thing changed is the holding period.
Please look at the attached picture which gives accurate information about new taxes, WHT and CGT are presented for current period and proposed under filer and non filer. Please take some time to understand and then post questions.
Salman.A® replied on Sunday, June 5, 2016 11:24 AM
Sorry unable to upload the JPG image. I will type it here.
WHT ON SALE OF PROPERTY
FILER (current) 0.5% (proposed) 1%
NON FILER (current) 1% (proposed) 2%
WHT ON PURCHASE OF PROPERTY
FILER (current) 1% (proposed) 2%
NON FILER (current) 2% (proposed) 4%
NOTE: WHT is set to DOUBLE which can fully be adjusted in your income tax returns.
CGT ON SALE OF IMMOVABLE PROPERTY
CURRENTLY
10% if SOLD within the first year
5% if sold between 1-2 YEARS
PROPOSED
10% CGT FLAT RATE for up to 5 years
Note: people who have bought properties within this fiscal year and who are panicked to sell their holdings before 30th June will have to give 10% CGT as per old RULES, if they wait and let the market absorb the news of taxes they still will be paying 10% CGT. Basically nothing has changed for short term investor. only WHT will be doubled.
I dont see any major drawbacks in property with these taxes.
And please if your property rate has doubled in past 1 year it wont hurt paying few lacs to Government as Taxes. Besides taxes are on DC value not your actual tradable value.
I wish best of luck to the investors. |
Adrees® replied on Sunday, June 5, 2016 11:34 AM
Dear Salman A. please can you elaborate the how the Capital gain is calculated. is tax on gain or straight away on DC value of property at the time of transaction.
thanks |
B A Rana® replied on Sunday, June 5, 2016 11:48 AM
"Gain" means profit.
If no profit no CGT.
CGT = (DC rate on selling date - DC rate on buying date) X 0.1 |
Ali replied on Sunday, June 5, 2016 12:21 PM
@ Salman
Previously we have Stamp Duty, CVT, Advanced income tax and CG tax.
What is WHT ? Was it available previously? |
Salman.A® replied on Sunday, June 5, 2016 01:33 PM
Every Time we sell our property within first two years, we pay CGT. It is calculated at DC rate. Basic formula to calculate CGT is as follows.
10% of the capital gain or 2% of the recorded value at the time of sale, whichever is higher
Usually within 1 year DC values are not revised so we pay 2% of DC value as CGT and this is what most of us are paying even TODAY.
Mr B A Rana is not correct in his calculations. There will always be CGT. Government is smarter than us. |
Abdal® replied on Sunday, June 5, 2016 02:19 PM
@Salman. You have elaborately described the matter at hand. However, for further clarity will you be able to advise. 1) whether iCGT is a federal or provincial tax 2) will it be possible to quote the relevant legal provision wherein you are of the that CGT would be higher of 10% of gain or 2% of recorded sale value 3) recorded sale value is the value on ehich agreement is signed / market value on which transaction is done or value on which duties are paid ( normally DC rate), this refers to the case where there may be a difference between the two. |
SIM replied on Sunday, June 5, 2016 02:33 PM
Thanks Mr Salman. You have been great help. |
Maqsood replied on Sunday, June 5, 2016 03:53 PM
You said "10% of the capital gain or 2% of the recorded value at the time of sale, whichever is higher" But as per page 32 of official text of budget speech nothing regarding 2% is mentioned. http://www.finance.gov.pk/budget/budget_speech_english_2016_17.pdf |
NT replied on Sunday, June 5, 2016 06:55 PM
One can find further detail of Capital Gains on disposal of Immovable Property in following sections of IT Ordinance:
Definitions: SECTION 37
Rates: THE FIRST SCHEDULE - PART I - Division VIII |
Jameel Mughal® replied on Sunday, June 5, 2016 07:37 PM
these are 2014 Rates, Actually due to under reporting of gain, Govt is implementing 10% on gain or ?? [ must be be 4 to 5%] of DC rate whatever is higher, More details are still to come
see the draft of 2014
Sr. No. Description Rate
1. Sale within one year of acquisition 5% of the capital gain or 2% of the recorded value at the time of sale, whichever is higher
2. Sale between more than one but within two years of acquisition 4% of capital gain
3. Sale between more than two but within three years of acquisition 3% of capital gain
4. Sale between more than three but within four years of acquisition 2% of capital gain
5. Sale between more than four but within five years of acquisition 1% of capital gain
6. Sale after five years of acquisition No tax. |
NT replied on Sunday, June 5, 2016 08:26 PM
Capital Gains on disposal of Immovable Property is an overlapping subject between Federal & Provisional Govt.
As per Income Tax Ordinance Rate is 10% of Capital Gain(Sell within 1Year) & 5% of Capital Gain (Sell after one & before two years) & no tax if sell after two years.
However currently CGT is charged based on Punjab Finance Act that is 2% of DC rate (sell in one year) and 1% of DC rate (1-2 years) and zero after two years to "avoid the complications of accurate calculation of Capital Gain on Transactions".
Please correct me if my understanding is wrong. |
