A Comprehensive Guide to Property Tax in Pakistan

Having a property holds significant value to the owner, and with the rise of real estate in Pakistan, every individual wishes to invest in properties. In addition to being a haven, properties bring significant revenue, and their value keeps blooming yearly. While having a property is commendable, paying property tax is even more.

Being a responsible citizen, you must pay property tax in Pakistan. If you have recently invested in a property and want to learn more about paying taxes, this guide is for you.

Table of Contents

What is Property Tax?

A property tax in Pakistan is a certain amount of money on your property that you pay to the government. The money you pay as tax helps the government to build infrastructure, launch new projects, and increase the country’s GDP.

Regarding property tax in Pakistan, it applies to all sorts of properties you own, including your plots, files, farms, buildings, or any tangible asset you hold. As of Budget 2022-2023, the property tax varies between 2-5%.

Types of Property Taxes in Pakistan

There are three types of property tax in Pakistan:

Capital Value Tax (CVT)

Capital value tax is the property tax imposed by FBR on the sale or transfer of residential or commercial immovable property, such as land, buildings, or houses. The District Commissioner offices across the country set them. The Federal Board of Revenue (FBR) determines the rate of Capital Value tax, which can vary depending on the type of property being sold or transferred and the amount it is being sold for.

According to the Budget 2022-2023, the Capital Value Tax rate is fixed as

5% for plots and files
10% for construction
15% for high-rise apartments

Withholding Tax

Withholding tax is the tax deducted at source, especially one levied by some countries on interest or dividends paid to a person resident outside that country.

As of Budget 2022-2023, the withholding tax is

1% for plots and files
1.5% for construction
2% for high-rise apartments

According to Budget 2023-2024, filers of income tax returns will now be required to pay a higher withholding tax of 3%, previously 2%. Conversely, non-filers will face an increased withholding tax rate of 6%, up from the previous 4%.

Similarly, the withholding tax rates for purchasing or transferring immovable property have also been adjusted under section 236C. Filers will now need to pay 3% in advance tax, compared to the previous rate of 2%. Non-filers, however, will be subject to a significant rise in the withholding tax rate, which has been increased from 7% to 10.5%.

Capital Gain Tax

Capital gain tax is a tax on capital gains or profit earned by selling assets such as stocks, land, or buildings.

As of Budget 2022-2023, the capital gain tax is

5% for plots and files
10% for construction
15% for high-rise apartments

Capital gain tax will only be applied for plots or files if the property is sold before 6 years. After the 6th year, the property is exempt from CGT.

15% for a holding period of less than 1 year.
12.5% for a holding period of 1-2 years.
10% for a holding period of 2-3 years.
7.5% for a holding period of 3-4 years.
5% for a holding period of 4-5 years.
2.5% for a holding period of 5-6 years.

If the holding period exceeds 6 years, no CGT will be applied.

CGT will only be applied for houses if the property is sold before 4 years. After the 4th year, the property is exempt from CGT.

15% for a holding period of less than 1 year.
10% for a holding period of 1-2 years.
7.5% for a holding period of 2-3 years.
5% for a holding period of 3-4 years.

If the holding period exceeds 4 years, no CGT will be applied.

For high-rise properties, CGT will be applied at a rate of 15% for the first year and 0% for the second year.

15% for a holding period of less than 1 year.
7.5% for a holding period of 1-2 years.

If the holding period exceeds 2 years, no CGT will be applied.

What is FBR Property Tax in Pakistan?

FBR property tax in Pakistan is the tax on properties you pay to FBR, a government institution responsible for tax collection in Pakistan. Property owners must pay the property tax to the FBR annually based on the rental value of their properties.

The payment of property tax in Pakistan can be made through the official website of the FBR or by visiting the local property tax office.

How does FBR calculate Property Tax?

FBR undertakes the following formula for determining property tax in Pakistan:

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

The Tax Rate varies between 2% and 5% depending on the category of the property, which can be residential, commercial, industrial, or agricultural.

How to Make Property Tax Payments to FBR?

You can visit the FBR official website to pay Pakistan’s property tax. The payment can be made through

Demand draft
Cheque
Online banking.

Things You Need to Apply for Property Tax Records

To apply for property tax records, you need

An application from a registered property owner in plain paper court fee duly affixed.
A copy of the CNIC of the applicant.
A proof of payment of Property Tax in Pakistan.

Which Properties are Exempted from Property Tax in Pakistan?

Listed below are some of the properties exempted from property tax in Pakistan:

Residential houses constructed on a land area of less than 5 Marla.
The property is not capable of commanding annual rent exceeding PKR. 4320/-
A single house not commanding annual rent exceeding PKR. 6480/- if occupied by the owner for his residence.
The buildings owned by widows, minor orphans, and/or disabled persons with tax liability of which is up to PKR.12150/- per annum are exempted.
One residential house up to 1 Kanal owned and occupied by a Federal or Provincial Retired Government servant is exempted.
The buildings owned by the Government or a Local Authority such as a Corporation, Municipality, or town committee.
Mosques and other religious buildings.
Buildings and Lands used as public parks and playgrounds, schools, boarding houses, hostels, libraries, and hospitals.

Deemed Rental Income Tax

A significant change has been observed in the Budget 2023-2024 regarding the taxation of real estate assets on a deemed rental income basis above 25 million. This means the government will consider a property to earn rental income even if it is not rented out. The property owner will be taxed on this deemed rental income. The tax rate for the deemed rental income tax is 10%.

The government’s aim behind these changes in the taxation policies of the real estate sector is to encourage investments in the construction sector.

Impact of the 2023-24 Budget on the Real Estate Sector in Pakistan

The increased rate of property taxes under Budget 2023-2024 has the following impact:

Buyers, especially non-filers, will hesitate to invest in real estate due to increased taxes.
The value of properties will decline due to increased taxes.
The government will earn more revenue and invest in national projects.
The non-filers will be eager to become filers to benefit from low tax rates on filers.

The Future of Property Tax in Pakistan

The future of property tax in Pakistan is bright as the real estate sector in Pakistan is growing rapidly, and the government is constantly looking for ways to increase its revenue from the sector.

The government is expected to introduce new measures to make the property tax collection process more efficient and increase the revenue generated from property tax.

The Bottom Line

The real estate sector is currently booming, and newer projects are taking shape. Individuals are requested to pay property taxes on time to encourage the government to invest in lucrative projects and brighten the country’s future.

FAQS

What is the property tax rate in Pakistan?

According to Budget 2023-2024, the property tax in Pakistan varies between 2-5%.

What is the gain tax on property in Pakistan 2023?

The gain tax on properties in Pakistan is 5% on plots/files, 10% on construction sector and 15% on high-rise buildings.

What is the new tax on property in FBR?

According to new tax on property, 3% would be collected from filers and 10.5% from non-filers.

What is the PT 10 property tax?

PT 10 is a challan upon which the name of the assesses his property number, amount of tax for current financial year arrears (if any), and last payment date is mentioned.

What is FBR rate property?

The FBR rate of property for Tax Filer Seller is 1% of the value and for Non-Tax Filer Seller, it is 2% of the FBR rate. For example, you are selling a 10-marla plot in a society wherein FBR value is 2.5 lacs per marla. So FBR rate for that plot will be 25 lacs.

How much is property tax in Punjab?

The property tax in Pakistan is 5% of the total cost is taken as the annual cost, and 0.5% tax is charged on the annual cost. 7.5 % of the annual tax is imposed on residential rented property, and 10% is imposed on rented commercial industrial property.

Who will pay property gain tax in Pakistan?

The taxpayer will pay the property gain tax on the sale of immovable property in Pakistan.

How much is gain tax on property?

The gain tax on property in Pakistan is 100% on not exceeding one year. It is 75% if it exceeds one year but not eight years, and 75% if it exceeds eight years.

Who are exempted from property tax in Pakistan?

If the rent from a property is donated to a religious or charity organization, it is tax-free. The exempted property includes buildings and dwellings held by widows, orphans, or disabled persons with an annual income of up to PKR 12,150.