The Pakistani real estate market is undergoing significant changes with the introduction of new tax policies for the fiscal year 2024-25. These changes, particularly impacting capital gains tax (CGT), federal excise duty (FED), and advance income tax, are expected to have a ripple effect on property prices and investment behavior.
Key Changes in Real Estate Taxes
1. Capital Gains Tax (CGT):
Previously, CGT for properties sold within 6 years of purchase was subject to a sliding scale ranging from 15% to 2.5%. However, the government has implemented a flat rate of 15% for both filers and non-filers, regardless of the holding period. This change will particularly affect individuals holding properties for more than 6 years, as they will now pay 15% tax regardless of the profit.
2. Progressive Withholding Tax on Transfer of Immovable Property:
Currently, the purchase of immovable property is taxed at 3% for filers and 6% for non-filers. The new proposal introduces progressive withholding tax rates to address the issue of delayed tax returns:
- Filers:
- Property value up to Rs 50 million: 3%
- Property value from Rs 50 million to Rs 100 million: 3.5%
- Property value above Rs 100 million: 4%
- Late/Delayed Filers:
- Property value up to Rs 50 million: 6%
- Property value from Rs 50 million to Rs 100 million: 7%
- Property value above Rs 100 million: 8%
- Non-Filers:
- Property value up to Rs 50 million: 12%
- Property value from Rs 50 million to Rs 100 million: 16%
- Property value above Rs 100 million: 20%
For the sale of immovable property:
- Filers:
- Property value up to Rs 50 million: 3%
- Property value from Rs 50 million to Rs 100 million: 4%
- Property value above Rs 100 million: 5%
- Late/Delayed Filers:
- Property value up to Rs 50 million: 6%
- Property value from Rs 50 million to Rs 100 million: 7%
- Property value above Rs 100 million: 8%
- Non-Filers:
- Uniform rate of 10% irrespective of property value
3. Federal Excise Duty (FED) on Immovable Property:
To stabilize the real estate sector and curb speculation, a Federal Excise Duty (FED) of 5% is proposed on new plots, residential, and commercial property. This includes:
- Commercial Properties and First Sale of Residential Properties: A 5% FED will be applied.
Impact on the Real Estate Market
The proposed changes in real estate taxation for 2024-2025 are aimed at creating a more structured and compliant tax environment. These changes include significant adjustments to capital gains tax, progressive withholding tax, and the introduction of FED on immovable property. Property buyers, sellers, and investors must stay informed about these updates to make well-informed decisions.
How These Changes Will Affect Property Prices
The changes in tax policies are expected to have a mixed impact on the real estate market. While the flat CGT rate and increased advance income tax for non-filers may initially dampen market activity, the government’s intention to encourage filer compliance and reduce tax evasion could lead to increased transparency and long-term stability.
Key Takeaways:
- The new tax policies are aimed at increasing revenue and encouraging tax compliance.
- The impact on property prices will depend on the market’s response to the changes.
- Non-filers will face a significant financial burden due to the higher CGT and advance income tax rates.
- The government’s efforts to streamline the real estate sector could lead to increased investment and market growth in the long term.
Contact Information
- Phone: [0300-0063212 | 0301-3044339]
- Email: [assetbuilders@gmail.com]
- Address: [Asset Builders, Street Pak Turk School, Multan Public School Road, Multan, Pakistan, 60000}