Tax on Property in Pakistan 2024-25 Budget

The real estate sector is among the most influential industries in Pakistan. Moreover, this sector significantly contributes to the GDP because it is the country’s top-most taxed industry. It is one of the nation’s most efficient and massively invested sectors. The importance of real estate can also be seen in the recent budget, which introduced several taxes on buying and selling properties.

Therefore, we will share the facts of the property taxes introduced in the 2024–25 budget, analyze their effects on the real estate market, and provide other appropriate information.

What is Property Tax?

Property tax is a mandatory financial contribution property owners must pay to the government in Pakistan. This tax revenue is crucial for funding infrastructure development, initiating new projects, and boosting the nation’s GDP.

Indeed, the Federal Board of Revenue (FBR) in Pakistan imposes several types of property taxes. Each category has specific rates and significantly influences the country’s overall real estate market.

Property Registration Tax in Pakistan

The tax depends on the purchase time and the property’s present value. Property owners are required to pay a tax to register their property. However, provincial revenue departments collect this registration tax.

Types of Property Taxes in Pakistan

Understanding the various types of taxes that apply to all kinds of properties nationwide is necessary. There are three main categories of property taxes in Pakistan:

• Capital Value Tax (CTV)
• Withholding Tax (Advance Property Tax)
• Capital Gain Tax (CGT)

Capital Value Tax

Capital Value Tax (CVT) applies when transferring or selling immovable assets such as buildings, houses, and lands. In addition, the FBR determines the Capital Value Tax rate, which differs based on the type of property involved. However, property sellers are also subject to a notable tax on property sales.

The CVT is fixed at 2% of the property’s value and relies on the purchase agreement, as mandated by the Federal Act of 2006. Some individuals report the property’s DC valuation instead of its actual market value to reduce their tax liability.

Withholding Tax (Advance Property Tax)

The withholding tax is imposed on buying or selling any immovable property. However, this tax becomes relevant when the buyer receives the property allocation. Both the seller and the buyer are subject to this tax. According to the updated property tax regulations in Pakistan, the withholding tax (advance property tax) must be paid as given below:

Person		Property Net Worth up to 50 Million	Property Net Worth 50 Million to 100 Million	Property Net Worth More than 100 Million
Filer		3%	3.5%	4%
Late-filer		6%	7%	8%
Non-filer	Buyer	12%	16%	20%
	Seller	10%

Capital Gain Tax (CGT)

Capital Gains Tax is the tax on profits generated from the sale of immovable property. As outlined in the 2024–25 budget, the CGT rates effective from July 1, 2024, are as follows:

• 15% CGT for Filers
• 15-45% CGT for Non-Filers (the FBR will determine the exact rate based on the property’s valuation)

However, until the previous year, Capital Gains Tax (CGT) depended on the holding period (1 to 6 years) for the constructed property, plot, or flat. According to the updated property tax regulations for 2024, the CGT rate will now be constant regardless of how long the property has been held or its type.

Federal Excise Duty

The Federal Excise Duty introduced this year mandates payment when allotting or transferring both commercial and residential properties.

• The FED for the allotment or transfer of residential properties is 5%. However, it’s essential to highlight that this duty only applies to the first owner.
• Similarly, the Federal Excise Duty (FED) for the allotment or transfer of commercial properties is also 5%.

What is the FBR Property Tax in Pakistan?

FBR is the governmental body tasked with collecting taxes in Pakistan. Property owners are mandated to pay an annual property tax to the FBR, which is calculated based on the rental value of their properties. In the following sections, we will explore the property tax in Pakistan and other types of taxes instituted by the FBR. The Federal Board of Revenue classifies taxpayers into three distinct categories:

• Filer: An individual who consistently pays taxes and appears on the Active Taxpayers List (ATL).
• Non-Filer: An individual who does not pay taxes regularly and is not listed on the Active Taxpayers List (ATL).
• Late-Filer: An individual who fails to submit taxes by the deadline or pays them after the specified time given by the government.

How do you calculate your FBR property tax in Pakistan?

The Federal Board of Revenue (FBR) determines the tax based on the total rental income of a property. Here is the formula used for tax calculation on properties in Pakistan:

Property Tax = (Rental Value of Property * Tax Rate) / 100

How do you pay property tax to FBR in Pakistan?

You can pay your property taxes through the FBR (Federal Board of Revenue’s) authorized website or by visiting the local property tax office. Moreover, the annual property tax in Pakistan can be paid through the following methods:

• Cheque
• Demand Draft
• Online Banking

How do you apply for property tax records?

Below are the required documents to access your property tax records:

• Evidence of previously paid property taxes
• Court-approved registered property ownership documents
• Copy of the applicant’s CNIC

Impacts of the 2024–25 budget on the Real Estate Market

The 2024–25 budget has significantly influenced the real estate sector, introducing numerous revisions to property taxes in Pakistan, with heightened taxes on residential and commercial properties. However, these tax modifications, though challenging, offer advantages and disadvantages. Here are some effects of the 2024–25 budget on the real estate market as a whole:

• Impact on Property Values
• Less Demand
• Boost in Tax Collections

Impact on Property Values

Property prices may decrease due to the new taxes, as sellers might be unwilling to purchase properties at elevated prices to accommodate the tax adjustments.

Less Demand

The demand for real estate properties is expected to decline due to higher withholding taxes. Buyers who have yet to file taxes may be aware to invest in property.

Boost in Tax Collections

Higher tax rates will enable the government to collect substantial revenue for developmental projects.

Final Words

The debate over property taxes in Pakistan has become popular, raising questions about the future revolution of the real estate sector. The newly implemented taxes have brought both advantages and disadvantages to the market. In Pakistan, real estate has historically been vital to generating tax revenue. Regardless of these effects, it remains crucial for property owners to pay their taxes punctually to prevent any penalties associated with late payments.

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