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How Property Tax Is Calculated and Paid in Pakistan?

How Property tax is calculated and paid in Pakistan?

What Is Property Tax?

Property tax is a tax assessed on real estate. This includes land, buildings, personal property, and the like. This type of tax is calculated based on how valuable the property is. The tax is paid either annually, or semi-annually by property owners. 

The reason why properties are taxed by the government is that local governments use this revenue to fund their services such as public schools, police, parks, municipal services, and the like. Taxes help pay for public works and public projects so it is likely that a country with a stellar real estate industry would affect the development (building new roads, bridges, and infrastructure in genuine). 

What Is Property Tax?
Property Tax

Revenue generated from Property Tax makes up for a significant chunk of funds used to provide essential services such as the Police. The property tax you pay will depend on the local tax rate set by the government and any exemptions that apply to you.

Wondering how you can calculate and pay property tax? This is an in-depth article to help you get started. 

Also Read: 5 Tips to Mitigate Risk in Real Estate Investment

Who Needs to Pay Property Tax?

As the owner of a property, you will have to pay a tax. This tax is levied on homes, land, commercial buildings, and other types of real estate. In many cases, the property tax is based on the value of properties as well as certain factors that are determined by local governments. The size of a property is also one of the factors that affect taxation as well as location, building structures, and the types of property. 

Who Needs to Pay Property Tax?
Who Needs to Pay Property Tax?

Property tax is also sometimes paid by the renters or the tenants but this is a lot less common. Tenants and renters have to pay property taxes under certain commercial and industrial leases. It is important to remember that property and tax laws vary in each country. So, you can get the exact picture by checking with the local authorities and property taxation departments. 

How Is Property Tax Calculated in Pakistan

The real estate sector of Pakistan is the driving force of its economy. Property taxes are often calculated based on the annual rental value (ARV). This is determined by the local government authority. The ARV is an estimate of the amount of rent a property generates yearly. The rent is also determined by the location, size of the property, and conditions of the property. So, the value of the property, rent, and taxes are all linked. 

How Is Property Tax Calculated in Pakistan
How Is Property Tax Calculated in Pakistan

The property tax rate varies in each province and city of Pakistan. The ARV determines the tax rate, which is usually between 0.5 to 2%. The ARV in cities such as Islamabad, the capital, will be higher than in other locations. The size of the property will also determine the tax percentage. The tax rate for commercial properties is usually higher than for commercial properties. 

The property tax in Pakistan is calculated by determining the ARV of the property. The local government can help you with that. They will calculate the tax by multiplying the ARV with the applicable tax rate to get the annual property tax amount. 

Here is an example: 

ARV=500,000 PKR

Tax Rate= 1% 

Annual Property Tax= 5,000 PKR 

Can You Avoid Paying Property Tax?

Avoiding property taxes is not legal and we highly recommend any attempts to avoid it. Property taxes are mandatory to pay and all property owners are subjected to this tax. If you fail to pay, you will be liable to legal penalties, fines, and even seizure of property in serious cases. 

No, it is not legal to avoid paying property tax in Pakistan. Property tax is a mandatory tax that property owners are required to pay by law, and failure to pay can result in legal penalties, such as fines and even seizure of the property.

Can You Avoid Paying Property Tax?
Can You Avoid Paying Property Tax?

In some cases, there are deductions to your taxes because your property may be linked to charitable causes, religious organizations, and the like. In order to qualify for these deductions, you will have to contact your local government authorities. 

Property taxes fund essential services and are an important source of revenue for local governments. If you fail to pay property taxes the negative consequences may include straining the economy. Be sure to comply with property taxation laws for the benefit of the country and the economy in general. 

Also Read: Who Should Not Invest in Real Estate?

How to Pay Property Tax in Pakistan

The procedure for paying property taxes may vary depending on the city or province. If your property is located in Islamabad, you will have to reach out to the relevant local authority. Here is the general overview of the process to guide you: 

  1. The first thing you have to do is to obtain a property tax assessment notice. The local government will provide this to property owners. This will contain information about the ARV (annual rental value). This will also guide you regarding the amount of property tax that is due. Reach out to your local government authority to obtain this notice and get started on paying your property taxes. 
  1. Now that you have the notice you have to calculate your property tax. You can use the information provided in the notice to calculate the tax amount that is due for the year. You can multiply your ARV by the tax rate for your provided to find the annual property tax due. 
  1. Paying the property tax is the next step. After getting the exact number for the annual property tax you can now make the payment. You will have to pay the property tax in person at the local government office that is responsible for property tax collection. You can also pay online on the official website of the property tax collection authority. There are certain cities where you can pay the property tax through ATMs and mobile banking channels. 
  1. After you have made the payment you can obtain a receipt from the local government office. This is an important step because you need proof of the payment for other property-related legal procedures. 

Property payment has a deadline and you will have to find out what that is by reaching out to the local government authority for your city and province. The due dates are important because you can incur penalty charges in the event of late payment. 

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