Tax on Property in Pakistan

The Real Estate industry is one of the most powerful industries in Pakistan. It is one of the very few top-performing and highly-invested industries in the country. It also contributes greatly to the GDP as it is the highest-taxed sector in the country. It can also be witnessed by the recently passed budget which has implemented various taxes on property selling and purchase.

As a matter of fact, there are various types of property taxes applied by the FBR Pakistan. Each property tax has different values and has a profound impact on the overall real estate market across the country. So, let us get into the details of the tax on property in Pakistan that has been put in the budget for 2024-2025, their impact on the real estate market, and other details.

What is FBR Property Tax?

FBR stands for Federal Board of Revenue, the government department responsible for collecting taxes in Pakistan. The tax on property in Pakistan, which we will discuss below, and all other taxes are applied by the FBR. The FBR divides taxpayers into 3 categories:

Filer: The person who is a regular taxpayer and whose name is on the Active Taxpayers List (ATL).
Late-Filer: The person who does not return taxes on time or pays the taxes after the due date (July, August, September) or as described by the government.
Non-Filer: The person who is not a regular taxpayer and whose name is not on the Active Taxpayers List (ATL).

Types of Property Taxes in Pakistan

Before we get into the details of the property taxes implemented or modified in the budget, it is important to know the types of taxes applicable to all types of priorities across the country. So basically, there are 3 types of property taxes in Pakistan:

Capital Gain Tax (CGT)
Advance Property Tax or Withholding Tax
Federal Excise Duty (FED)
Capital Value Tax (CTV)

Capital Gain Tax

Capital Gain Tax (CGT) is basically the tax on property that is to be paid from the net profit or the gain obtained from the sale of immovable property.

The percentage of CGT as implemented in budget 2024-2025, applicable on the sale of the property after 1st July 2024, is given as:

15% CGT to be paid by the Filers
15-45% CGT to be paid by Non-Filers(the exact amount shall be decided by the FBR, depending on the value of the property)

It is very important to know here that till last year, the CGT was dependable on two things: the holding period of the property(1-6 Years) and the type of property (Plot, Constructed Property, or Flat). However, as per the revised Taxes on Property 2024, the CGT percentage will remain the same IRRESPECTIVE of the property holding period and type of property.

Advance Property Tax or Withholding Tax

The Advance Property Tax is the tax to be applied on the sale or purchase of any immovable property. This tax is applicable as soon as the purchaser gets the file/plot allocation. This tax applies to the seller as well as the buyer of the property.

As per the new property taxes in Pakistan, the advance property tax is to be paid as follows:

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

Federal Excise Duty

Federal Excise Duty(FED), applied this year, is the amount to be paid on allotment or transfer of commercial or residential property.

Federal Excise Duty on allotment or transfer of Commercial property is 5%.
While FED for allotment or transfer of residential properties will also be 5%. It is important to note here that the FED for the residential property should be applied to the first owner.

Capital Value Tax

CVT is imposed on transferring and selling immovable properties like houses, buildings, and land. The Federal Board of Revenue (FBR) finalizes the rate of CVT, which can be different under property type. It must be noted here that the Capital Value Tax is usually applicable to the buyer of any immovable residential or commercial property.

The Capital Value Tax rate for the year 2024-2025 is set constant at 2% of property value and depends upon the purchase agreement following the Federal Act 2006.

How to Calculate Tax on Your Property?

Now you must be wondering about the rate or percentage of tax applicable to your property, so let’s make things easier for you.

As a matter of fact, every kind of property in Pakistan is generally registered as per the DC rate of the respective area or region, which is set by the provincial government of each province. So to calculate the tax on your property, you need to check out the DC Rate list 2024, of your respective District or Tehsil.

How to Pay Property Tax to FBR in Pakistan?

Property taxes can be paid by visiting the FBR official website or the local office for property tax. Moreover, FBR enables the property owners to calculate the property tax by considering the location and size of the property. You can make the annual payment of tax on property in Pakistan in the following formats:

Online Banking
Cheque
Demand Draft

How to Apply for Property Tax Records?

Makaan Solutions advises you to keep a record of paid property tax bills. Following are the must-have documents you need to present to know your property tax record:

Applicant CNIC copy
Proof of already paid taxes
Registered property ownership papers approved by the court

Impacts of Property Taxes 2024 on Housing Societies

impact of property taxes 2024 on the real estate

Considering all the above-stated property taxes on all kinds of property, it is affirmed that the budget 2024-2025 will create a strong impact on the real estate market. These property taxes are a blessing in disguise in various ways.

Positive Outlook

However, it must be kept in mind that all the property taxes are calculated as per the DC rates, which are relatively lower than the fair market value or the FBR value. The DC rates list shows that there is no such residential property worth more than 50 million, not even Bahria Town or DHA. So, while calculating the taxes, the tax percentage set by the FBR shall be discounted, providing a sense of relief for the buyers as well as sellers.

Downside of the Property Taxes

Besides, here are some of the major concerns that can negatively impact the real estate market.

Less Demand

There will be a decreased demand for transactions in real estate because of an increase in withholding taxes. Buyers, especially non-filers, will hesitate to invest in real estate.

Effect on Property Prices

The property can go downward because of new taxes because sellers hesitate to buy properties at high rates to adjust taxes.

Buying Intention

The buyers will try to deal with the filers due to the tax rate, which affects the real estate market.

How to Calculate Your FBR Property Tax in Pakistan?

FBR calculates the tax on the overall rental value of a property. The formula for calculating the tax on property in Pakistan is mentioned below:

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

Property Registration Tax in Pakistan

The property owners need to pay the real estate property registration tax. It relies on the time of purchase and the value of the property at the current time. The provincial revenue departments are responsible for collecting the property registration tax.

Importance of Paying Property Tax to FBR in Pakistan

Legal responsibility of every property owner
Collected property tax will be used for the development of local infrastructure
Failure to pay taxes will result in legal actions and penalties
Transparency in the real estate market
Revenue generation
Compliance and documentation of the economy and cash flow

Final Words

Tax on property in Pakistan has stirred a huge debate in the country regarding the future of Real estate. Real estate has always played a crucial role in generating the overall revenue. The recent taxes have positive as well as negative impacts on the overall real estate market. However, irrespective of the overall effect, one must pay their property taxes on time to avoid any surcharges for non-payment.