To observe with the conditions set by the International Monetary Fund (IMF) for a vital bailout package, the Pakistani government has enacted extensive changes to real estate taxation in the latest budget.
These reforms include unprecedentedly high taxes on both plots and constructed properties, aimed at increasing revenue collection and creating a more equitable tax system.
The new tax framework introduces higher Capital Gains Tax (CGT) and Advance Tax on property sales, affecting filers, late filers, and non-filers in different ways. Here is a detailed breakdown of the new tax rates:
CAPITAL GAINS TAX RATES FOR PROPERTY FOR FILERS
| Duration | All Properties |
|---|---|
| Up to 1 year | 15% |
| 1 to 2 years | 15% |
| 2 to 3 years | 15% |
| 3 to 4 years | 15% |
| 4 to 5 years | 15% |
| 5 to 6 years | 15% |
| Over 6 years | Flat 15% |
ADVANCE TAX ON SALE OF IMMOVABLE PROPERTY 2024
| Property Value | Filers | Late Filers | Non-Filers |
|---|---|---|---|
| Up to Rs. 50 million | 3% | 6% | 10% |
| Rs. 50-100 million | 3.5% | 7% | 10% |
| Above Rs. 100 million | 4% | 8% | 10% |
These modifications are intended to streamline the tax system across various property categories, ensuring a fairer distribution of the tax burden among property owners with different property values and ownership durations.
Implications for real estate market
The implementation of these tax rates is anticipated to significantly impact the real estate market. Industry experts suggest that the increased tax rates, especially the uniform 15% CGT on all properties regardless of the holding period, could deter speculative investments and promote market stability.
However, there are worries that these measures could also reduce overall activity in the property market, potentially influencing related industries.
Government’s perspective
Government officials contend that these changes are crucial to achieving the fiscal targets set with the IMF. They stress that the higher tax revenues will aid in stabilizing the economy and support the funding of vital public services and infrastructure projects.
In his budget speech, the Finance Minister underscored the importance of fair taxation and assured that the government would closely monitor the implementation of these taxes to address any emerging issues.
