All About Real Estate Taxes In Pakistan | 2022
 

Real EstateAll about Real Estate Taxes in Pakistan

August 23, 2022by ESPA0
Contents
  • Real Estate Tax
  • Various kinds of Real Estate Taxes
  • Real Estate Taxes in Pakistan
  • How property tax is calculated?
  • How to pay property tax online in Pakistan?
  • FBR Property Valuation
  • Property Tax Exemption?
  • What Does the Future Hold?

 

Real Estate Tax

The Real Estate tax is paid on the property which is possessed by a person or any other legal body, for instance, a company or a corporate. Overall, the Real Estate tax is a property aid value tax, which is considered a regressive tax.

As you know taxes are integral parts of state revenue, as they are imposed by the government on certain goods, services, and transactions. Taxes are usually imposed based on the value of the assets in the current market, such as taxes levied on land and other tangible personal property, including cars and boats.

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Property tax is imposed by the government and it is calculated by the local government where the property is located and is paid by the individual who owns the property.

Real Estate Taxes are levied by the governing authority of the jurisdiction in which the property is located. It can be a national government, a federal state, a county or a geographical area, or a municipality. Multiple jurisdictions can tax the same property.

Various Kinds of Real Estate Taxes

Different types of property Taxes in Pakistan are as follows:

  • Capital Value Tax
  • Capital Gain Tax
  • Withholding tax

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Capital Value Tax is a provincial tax and is paid by the buyer at the time of purchase of the property. As the name suggests, it is payable on the capital value of an acquired asset.

According to the Finance Act 2006, a person who buys a property has to pay Capital Value Tax. This is 2% of the total amount recorded. Money is paid to the government when buying property. Capital value tax is also included in the property documents. This is 3% of all legal documents called stamp duty.

Capital Gain Tax is related to Capital Value Tax. This is the amount that the seller has to pay to the government. Payment is made at the time of sale of the property. The tax applies to sellers’ property. The tax chart changes every year. The seller is liable to pay capital gains tax after 3 years. While the tax for the first year is 10%, it has been reduced to 7.5% in the second year and only 5% in the third year.

Capital Gain Tax is associated with Capital Value Tax. This is the amount that the seller must pay the government. Payment is made at the time of sale of the property. The tax applies to sellers’ property. The tax chart changes annually. The seller is obliged to pay capital gains tax after 3 years. While the tax for the first year is 10%, it is reduced to 7.5% in the second year and only 5% in the third year.

Withholding Tax is a combination of capital gains tax and capital value tax. This is the amount that both buyers and sellers pay. It is paid when the property is sold.

According to the tax percentage, both parties have to pay tax. If the property is submitted by the buyer on income tax, it remains 2%, but if the buyer is a non-filer, the tax increases to 45%. The huge increase ensures that property buyers become tax filers. The same is true of sellers. If they are filers, they will have to pay 1% tax, but if they are non-filers, the withholding tax will be up to 25%.

Real Estate Taxes in Pakistan

Different types of property impose different types of taxes on land and its structure. For instance, barren land will have significantly lower property taxes relatively a piece of property that has been fertilized. If there is access to public services, such as sewers, water, and gas, the land valuation may be higher, ultimately the property tax will be high.

For the fiscal year 2022-2023, the Federal Government of Pakistan has reviewed the new rates and imposed revised taxes on the real estate sector in the annual budget. The government has not only raised the advance and Capital Gains Tax (CGT) levied on the sale and purchase of properties but has also introduced a new “Deem Tax” on vacant or surplus properties.

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For instance, the FBR has levied a 1% deem tax on vacant and unused property value over Rs.25 million. The properties such as vacant houses, plots, farmhouses, or any land worth more than Rs.25 million do not generate regular income. The government has estimated the income of such properties at 5% annually, of which 20% will be taxed.

Property tax is levied on the annual value of land and buildings. In Pakistan, the rate of property tax imposed is different in other provinces as each province uses different rates. For Instance, In Punjab taxes are levied at the rate of 5% per annum. Whereas, The Sindh government levies a 25 per cent annual tax on property.

In Pakistan, Capital Gain Tax is paid on the profit or profit on the value of your property when you sell it before 4 years. All properties that will be sold after 4 years are exempt from CGT payment. In the present budget, as far as capital gains tax on the property is concerned, the following changes have been made:

  • You will now pay 3.5% tax if you make less than 5 million profit from selling your property before four years, as a replacement of 2.5% tax.
  • Furthermore, you will pay 7.5% tax if you make less than 5 million but make less than 10 million profit from selling your property before 4 years, as a replacement of 5%.
  • For profits over 10 million but less than 15 million, you will now pay 10% Capital Gain Tax, as a replacement of 7.5%.
  • Finally, for all profits over 15 million, you will pay a 15% Capital Gain Tax.
  • How Property Tax is Calculated?

 

As you know Property taxes are a major source of revenue for any nation. Numerous high authorities such as boards, councils, and legislatures meet to decide on appropriate rates. They hear the budget to determine how much money needs to be allocated to provide the various services needed by the local community. These services, such as education, transportation, emergencies, parks, recreation, and libraries, are financed through property taxes.

Real Estate Tax, Various kinds of Real Estate Taxes, real estate taxes in pakistan, property tax, , fbr property avaluation, property tax exemption, real investment, investment plans,

Many of you as property holders pay property taxes each year. However, you pay the tax bill when it is due, it is important to understand how property taxes are evaluated by the Property Appraiser’s Office in your locality. This way you can be sure that you are not being charged too much.

Excise and Taxation Department, the Government of Punjab has made a great initiative and developed an online calculator to find the tax imposed on certain property. You can visit their website and calculate your property tax as per the current market value.

How to pay property tax online in Pakistan?

Technology has made our work more convenient and effortless. Now you can pay your property taxes online without any hassle. ePay Punjab is a great initiative by the Punjab government as it helps you avail yourself the convenient online payment services, where you can pay your property taxes from anywhere. This online tax payment system is connected to the State Bank of Pakistan and all banks through the 1-Link network.

Real Estate Tax,

Paying your taxes through ePay Punjab allows you to go with ease without cash and paper. To pay your Real estate Tax online follow the following steps:

  • First, go to the Google Play Store or the Apple App Store then download the app(ePay Punjab App) to get easy ePay tax payment services at your fingertips.
  • Then, select the desired service; to pay against levy services, register, and enjoy exceptional services at home.
  • After preparing the invoice, you will be provided with a Payment System Identification (PSID) number.
  • Now, pay your property tax online. Pay your taxes at any ATM, Internet / Mobile Banking, TELCO Network Agent, Mobile Wallet, or Over the Counter (OTC) with a unique 17-digit PSID number.

Property Tax Exemption

Property tax Exemption is a percentage or a full tax amount that property holders do not have to pay. Certain property holders are exempted from paying taxes on their properties by the federal or the state government.

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  • Apart from category “A” zone residential houses, houses constructed on less than 5 Marla’s of land are exempted.
  • Such properties cannot be rented more than PKR per annum. 4320 / –
  • A single house whose annual rent does not exceed PKR. 6480 / – in case the owner has occupied his residence himself.
  • Properties owned by widows, minor orphans, or persons with disabilities are exempt from tax liability up to PKR.12150 / – per annum.
  • 100% exemption on house tax for widows of government employees.
  • An exemption on residential houses up to 1 Kanal possessed by a retired federal or provincial government employee.
  • Buildings owned by the government or local authority such as a corporation, municipality, or town committee
  • Mosques and other religious buildings are exempted.
  • Public places such as buildings and lands used for public parks and playgrounds, schools, hostels, libraries, hospitals, etc. are also exempted.
  • Such properties which are rented completely to religious or planned public charities are exempted from tax.

FBR Property Valuation

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It is important to know the prices of your property set by the FBR so that you can calculate the cost of your sale or purchase. In some places, lower FBR rates may cost you less tax, while in some areas higher FBR rates may cost you more tax.

The Government of Pakistan has started reviewing the DC rates of properties in all the major cities, since July 2006. You are bound to pay taxes imposed by the Federal Board of Revenue, even if you buy or sell your property in Pakistan.

Since 2016, property valuation rates have been revised several times by the FBR. The latest revision has been publicized on March 2, 2022.

The values credited by FBR are as follows:

  • 1% of the value is credited at the FBR rate for the tax filer buyer whereas; it is 2% for the non-tax filer buyer as per FBR rates.
  • Likewise, it is 1% for tax filer sellers as FBR rates and 2% for non-tax filer sellers as per FBR rates.

It is essential to know the prices of your property evaluated by the FBR to calculate the cost of your sale or purchase of the property. In some places, lower FBR rates may cost you less tax, while in some areas higher FBR rates may cost you more tax. To know more about property valuation rates visit the Federal Board of Revenue.

What Does Future Hold?

The Real Estate Industry of Pakistan is growing swiftly. The real estate development sector has grown exponentially due to population growth. Real estate trends in Pakistan have been changing for many years. Population growth is increasing demand and opportunities. Various opportunities related to real estate have been created in Pakistan. Buying real estate is now easier than ever. As a result, many people are open to buying and selling real estate because of the growing trend of buying a home in Pakistan.

As you know Real estate is the fastest growing business in Pakistan and various related industries are directly and indirectly associated with it. Rapid growth in the real estate industry will drive growth in various industries as well. However, the growth in real estate includes a number of broad challenges, including scattered regulatory frameworks, a severe shortage of low-cost housing, gradual adoption of technology, a loss of transparency, and insufficient flexibility.

The real estate industry has undergone rapid changes and fluctuations over the past few years. From government-imposed policies and laws to the changing political and financial background; such fluctuations have also affected individual property matters. For Instance, an absence of incentives for the dealers, and an obligation of sanction on non-filers to shop for a property worth more than 5 million until they sign in themselves with the FBR (Federal Board of Revenue).

Moreover, the strict law of FBR on banking transactions of non-filers, and levying of excessive taxes on transfers of belongings discouraged the buyers. In addition to this, a component that contributed to the slowdown of the actual property is the non-usage of the developmental price range that brought about the contraction of the construction area and consequently, the realty area.

It is concluded that the Real Estate tax is essential to pay as it is paid on the property which is possessed by a person or any corporate. Overall, the Real Estate tax is a property aid value tax, which is considered a regressive tax. Moreover, to make your country stable financially and economically paying taxes is important as it is an integral part of state revenue. Property Taxes are levied by the governing authority of the jurisdiction in which the property is located. It can be a national government, a federal state, a county or a geographical area, or a municipality. Multiple jurisdictions can tax the same property. In Pakistan, the Federal Board of Revenue (FBR) has the authority to collect taxes from the people and businesses. With the advancement of technology, paying property taxes has become effortless as you can pay your taxes from anywhere online. To know more about property updates stay in touch with Best Real Estate Blogs in Pakistan.

 

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