Capital Gain on Disposal of Immoveable Properties
Capital Gain on Disposal of Immoveable Properties: The Finance Act, 2022 has brought about certain amendments in the Income Tax Ordinance, 2001 (the Ordinance, hereafter). Some significant amendments on Capital Gain on Disposal of Immoveable Properties are explained hereunder: –
Earlier, the gain arising on the disposal of immovable property after the holding period of 4 years was exempt from tax.
Now the holding period concession will separately apply which for open plots is six years, for constructed property is four years and for flats is two years. Further, whole amount of gain on disposal of immovable property will be taxable at graduated rates provided in Division VIII of Part I of First Schedule of the Ordinance given as under:
| Sr. # | Holding Period | Open Plots | Constructed Property | Flats |
| 1 | Where the holding period does not exceed one year | 15% | 15% | 15% |
| 2 | Where the holding period exceeds one year but does not exceed two years | 12.5% | 10% | 7.5% |
| 3 | Where the holding period exceeds two years but does not exceed three years
|
10% | 7.5% | 0% |
| 4 | Where the holding period exceeds three years but does not exceed four years
|
7.5% | 5% | 0% |
| 5 | Where the holding period exceeds four years but does not exceed five years
|
5% | 0% | – |
| 6 | Where the holding period exceeds five years but does not exceed six years | 2.5% | 0% | 0% |
| 7 | Where the holding periodexceeds six years | 0% | 0% | 0% |
The concessional taxation regime for capital gains has been made applicable only to disposal of immovable properties situated in Pakistan. The benefit of holding period and concessional rate of tax is not available in respect of capital gains arising on disposal of immoveable property situated outside Pakistan.
Furthermore, to streamline capital gains taxation regime, the concessions earlier available under sub-sections (3) and (3A) of section 37 in terms of reduction in capital gain by certain percentages on disposal of capital assets held for more than one year has been withdrawn.
Sub-section (4A) of section 37 has been omitted. Accordingly, nonrecognition provision of section 79 will apply to detelmine the cost of acquisition on transfer of capital asset under the circumstances contained therein.
For more information on FBR’s new regulations / circulars/ SROs/ amendments in taxation laws in Pakistan please visit https://www.fbr.gov.pk/
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