Tax Rates on Capital Gains from Immovable Property
Tax rates on capital gains from immovable property: Finance Act, 2024 — Explanation regarding Important Amendments made in the Income Tax Ordinance, 2001
Important amendments made in Income Tax Ordinance, 2001 (“the Ordinance”) through Finance Act, 2024 are explained in the subsequent paragraphs.
Tax Rates on Capital Gains from Immovable Property
As per sub-section (1A) of section 37, gain arising on disposal of immovable property situated in Pakistan, to a person in a tax year shall be chargeable to tax under the head capital gains at the rates specified in Division VIII of Part I of the First Schedule. Prior to the Finance Act, 2024, the gain was taxed on the basis of holding period with maximum rate of 15% where holding period was less than a year for open plots, constructed properties and flats.
The rate decreased as the holding period increased so that the rate was 0% for plots where holding period was more than six years, 0% for constructed properties where holding period was more than four years and 0% for flats where holding period was more than two years.
Through the Finance Act, 2024, the concept of holding period has been done away with for properties acquired on or after the 1″ day of July, 2024.
The gain arising on disposal of properties which are acquired on or after the 1st day of July, 2024 will be taxed at the rate of 15% for persons appearing on the ATL on the date of disposal of property and at the rate specified in Division I of Part I of the First Schedule for individuals and AOPs not appearing on the ATL on the date of disposal of property and at the rate specified in Division II of Part I of the First Schedule for companies not appearing on the ATL on the date of disposal of property. However, for individuals and AOPs the rate shall not be less than 15% in any case.
For the properties acquired on or before the 30th day of June, 2024, the law as it existed prior to the Finance Act, 2024 will continue to apply i.e., gain on disposal of such properties will be taxed on the basis of holding period at the same rates as existed prior to commencement of the Finance Act, 2024.
Read full text of Explanation of Finance Act, 2024 Amendments made in the Income Tax Ordinance, 2001 for more updates on taxes from FBR click here.
