A Comprehensive Guide to Property Taxation in Pakistan for 2024

This is the new comprehensive guide on property taxes in Pakistan.

The best part?

Everything here applies to taxes in 2024.

Luckily for you, I have put my over 10 years of experience as a Transfer Officer into this property tax guide helping you with complex transactions.

(In other words: you don’t need to worry about reading out-of-date stuff.)

So without further ado, let’s get started…

In this post, you will explore:

• What is Property Tax
• Taxpayer Categories
• How much tax on property
• Types of property taxes
• Advance Tax
• For Buyer (236-K)
• For Seller (236-C)
• Who collects
• Capital Gain Tax (CGT)
• Stamp Duty
• How to pay

What Is Property Tax?

A property tax levy by a provincial/local government and real estate owners pay it. Property tax is a percentage of the assessed DC value of the property.

Who is a Taxpayer?

A taxpayer is an individual or organization that pays taxes to a Govt. department.

Taxpayer Categories

The FBR categorizes taxpayers into three groups according to the filer status:

Filers: Individuals who file taxes and are on the Active Taxpayers List (ATL). They’re on top of their tax game!

Late-Filers: Individuals forget the tax deadline (30th September of every year) or delay paying their taxes. They’re not on the list, but they’ll face consequences for late payment.

Non-Filers: Those who don’t file taxes and aren’t listed on the ATL. This group needs to get on board with their tax obligations!

On-road properties have higher DC rates than off-road properties.

To determine the DC value of a property, first, check if it’s located on-road or off-road. Next, use the corresponding DC rate for that area. Additionally, ensure you’re using the correct rate to avoid errors. Finally, apply the DC rate to calculate the property’s value.

How much tax is on your property?

A question a property buyer or seller asks is:

How much is tax on property in Pakistan?

The answer to this question is:

First, you need to know the DC rate. The DC rate varies by area and is set by the provincial government.

To calculate your property tax, follow these steps:

• Step No.1: Find your District or Tehsil’s DC Rate list for 2024.
• Step No.2. Check the rate for your area.
• Step No.3. Calculate your tax based on that rate.

Types of Property Taxes

Several common types of property taxes in Pakistan are:

1. Advance Property Tax (aka Withholding Tax) is a prepaid tax on property purchases, sale

2. Capital Gain Tax (CGT) is a type of tax levied on the profit made from the sale or disposal of a property.

3. Federal Excise Duty (FED): A tax on specific goods and services related to property, contributing to national revenue.

4. Stamp Duty is a fee/tax levied by the government on the property transfer. You must pay it in full and on time. A stamp-paid document is a legal document. The liability of paying stamp duty is that of the buyer.

Read also: A step-by-step guide on the Property Transfer procedure in Pakistan that has all you need to know. It may be a gift transfer or a transfer to legal heirs (Inheritance).

Advance Property Tax: A Guide to Withholding Tax

Do you buy or sell a property in Pakistan?

Be prepared for the Advance Property Tax, also known as Withholding Tax. This tax triggers as soon as you buy or sell a property. With that, you need to pay as per your tax status.

Here’s a breakdown of the Advance Property Tax rates. It is based on the property’s value and taxpayer status:

Immoveable Property (236K) – (on Buying a Property)

To buy a property, the below tax ratios apply as per your status as a taxpayer with the FBR:

Here’s a step-by-step procedure to calculate the property buyer tax:

Step 1: Determine the DC Value

To determine the DC value of a property, first, check if it’s located on-road or off-road. Next, use the corresponding DC rate for that area. Additionally, ensure you’re using the correct rate to avoid errors. Finally, apply the DC rate to calculate the property’s value.

On-road means the property is on the main road while off-road means the property is not on the main road i. e. in streets.  

On-road properties have higher DC rates than off-road properties.

Suppose:

– If the 5 Marla plot is on the main road: DC Value = Rs. 2,400,000

– If the 5 Marla plot is off-road: DC Value = Rs. 2,065,500

Step 2: Determine the Tax Rate

The tax rate depends on your current status as a taxpayer. Below are the tax ratios.

• Filer: 3%       
• Late Filer: 6%
• Non-Filer: 12%

Step 3: Calculate the Property Buyer’s Tax

Multiply the DC Value by the applicable tax rate

Formula for Advance Tax (For Buyer: 236K) = DC Value of the property X Tax Ratio (Taxpayer status)

Calculations:

Filer (3%)

• Main Road: Rs. 2,400,000 x 3% = Rs. 72,000
• Off-Road: Rs. 2,065,500 x 3% = Rs. 61,965

Late Filer (6%)

• Main Road: Rs. 2,400,000 x 6% = Rs. 144,000
• Off-Road: Rs. 2,065,500 x 6% = Rs. 123,930

Non-Filer (12%)

• Main Road: Rs. 2,400,000 x 12% = Rs. 2,88,000
• Off-Road: Rs. 2,065,500 x 12% = Rs. 2,47,860

Note: These calculations are based on the provided DC values and tax rates.

Immoveable Property (236C) – On Selling a Property

To sell a property, the following tax ratios apply as per your taxpayer status with the FBR:

Read also: Real Estate Area guides have everything you need to know.

Property Seller Tax Calculation

DC value for the property will be the same as for the buyer. However, the tax ratios are different for sellers as per section 236-C.

The difference is in the ratio for non-filers. The non-filers buyer ratio is 12% while the non-filers seller ratio is 10%.  

Step 1: Determine the DC Value

  Suppose:

• If the 5-Marla plot is on the main road: DC Value = Rs. 2,400,000
• If the 5-Marla plot is off-road: DC Value = Rs. 2,065,500

Step 2: Determine the Tax Rate

The tax rate depends on your current status as a taxpayer. Below are the tax ratios.

• Filer: 3%       
• Late Filer: 6%
• Non-Filer: 10%

Step 3: Calculate the Property Seller’s Tax

Multiply the DC Value by the applicable tax rate

Formula for Advance Tax (For Seller: 236-C) = DC Value of the property X Tax Ratio (Taxpayer status)

Example Calculations: (Filer)

•    DC Value (main road): Rs. 2,400,000 x 3% = Rs. 72,000
•    DC Value (off-road): Rs. 2,065,500 x 3% = Rs. 61,965

Step 3: Calculate Your Property Seller Tax

Filer (3%)

• Main Road: Rs. 2,400,000 x 3% = Rs. 72,000
• Off-Road: Rs. 2,065,500 x 3% = Rs. 61,965

Late Filer (6%)

• Main Road: Rs. 2,400,000 x 6% = Rs. 144,000
• Off-Road: Rs. 2,065,500 x 6% = Rs. 123,930

Non-Filer (10%)

• Main Road: Rs. 2,400,000 x 10% = Rs. 240,000
• Off-Road: Rs. 2,065,500 x 10% = Rs. 206,550

Who Collects Advance Tax on Property?

The property transferring authorities collect advance tax on behalf of the FBR while you buy or sell. Being withholding agents, they are allowed to receive an advance tax. This includes:

• The Sub-Registrar/Registrar
• Housing Authority/Projects
• Cooperative Housing Societies

Key Considerations

Tax Offset: The advance tax is adjustable against your final tax liability. Section 37 (capital gains), minimizes your tax burden.

No Duplicate Payments: If you opt for a payment schedule that includes advance tax. With that, you do not need to make payment at the time of the property transfer.

The best part is to consult a tax advisor to ensure compliance with all requirements.

Capital Gain Tax (CGT)

Capital Gains Tax (CGT) is a tax on the profit you make when selling assets, such as property or stocks. This profit is called a capital gain.

When Do You Pay Capital Gains Tax?

You pay CGT when you sell assets. But not on unsold assets or investments, no matter how long you’ve held them. Or how much their value has increased.

Note: Commercial properties, like shopping malls, pay different tax rates than residential properties.

When you sell a property, you must pay Capital Gain Tax (CGT) on the profit made.

Here’s how it works:

Filers: Pay 15% CGT on the net gain from selling a property after July 1, 2024.

Non-Filers: Pay between 15% to 45% CGT, depending on the property’s value, as determined by the FBR.

This rate applies to properties acquired on or after July 1, 2024. Properties acquired on or before June 30, 2024, fall in previous tax rates as per the period held.

Before, CGT rates varied based on the property’s holding period (1-6 years). And type (plot, constructed property, or flat).

But, with the revised Taxes on Property 2024, the CGT rate remains the same.

Let’s say you’re a Filer who bought a house in Lahore for PKR 5 million in 2020 and sold it for PKR 7 million in 2024. Your net gain would be PKR 2 million. You’d pay 15% CGT on this amount, which is PKR 300,000.

Stamp Duty

Stamp duty is a provincial tax collected on various transactions, including property registrations, property transfers, share transfers, power of attorney documents, and more.

Here are some examples of transactions that require payment of stamp duty:

• Property purchases or sales (e.g., buying or selling a house, apartment, or land)
• Property transfers (e.g., gifting a property to a family member)
• Share transfers (e.g., buying or selling company shares)
• Power of attorney documents (e.g., authorizing someone to manage your property)
• Lease agreements (e.g., renting a property for an extended period)
• Mortgage documents (e.g., securing a loan against a property)
• Deeds of trust (e.g., transferring ownership of a property to a trustee)
• Business asset transfers (e.g., selling or buying business equipment, vehicles etc.)

Pay Your Property Tax in Pakistan with Ease!

Are you a property owner in Pakistan wondering how to pay your property tax? Look no further! The Federal Board of Revenue (FBR) has made it convenient for you to pay your taxes online or in person.

Generate PSID

Visit the FBR website to generate a Payment Slip ID (PSID) for your property tax liability. This will give you an accurate estimate of your tax dues.

Pay Online or Offline

Choose from various payment options:

Online Banking: Pay online through bank applications like Internet banking or mobile banking apps. You can pay using your PSID.

Off-line: Deposit in Bank: Deposit the PSID amount in a bank.

Take Advantage of Convenience

Pay your property tax from the comfort of your own home or office. Avoid queues and save time with FBR’s online payment options.

Stay Compliant, Avoid Penalties

Make your annual property tax payment on time to avoid penalties.

Impact of Property Taxes 2024 on Private Housing Projects and Societies

The budget 2024-2025 is an attempt to revolutionize the real estate market. But what does this mean for housing societies? Let’s dive in and explore the effects.

A Blessing in Disguise?

On the bright side, property taxes are calculated based on DC rates, that are lower than fair market value.

This means buyers and sellers can have relief, as tax percentages are less to pay. Yet, you may have noticed the DC rates list no residential property worth over 50 million. It is even in prestigious areas like Bahria Town or DHA.

The Dark Side: Concerns for the Real Estate Market

Despite the positives, some concerns hurt the market:

Less Demand: Increased withholding taxes may deter buyers. Particularly late-filers and non-filers, from investing in real estate.

Property Price Drop: New taxes may cause sellers to hesitate to invest. This leads to a downward trend in property prices.

What is Property Registration Tax in Pakistan?

To register a property in Pakistan, owners must pay 1% Stamp duty. You pay taxes in addition to taxes paid in the FBR based on the property’s value and purchase time.

In Punjab, a 1% stamp duty applies to the Registry as a provincial tax.

To complete the registration process, the following taxes are required:

• 1% Stamp Duty (provincial tax for Punjab)
• FBR Challan Property Tax (Already Paid)

Conclusion

Taxes generate revenue. Real estate reflects the impact of recent taxes – both positive and negative. But pay your property taxes on time to avoid extra charges and ensure a stable financial future.