The conception of property tax on the file

Property tax is a steady and foreseeable source of revenue for the government since it is based on the value of the real estate, which tends to change bit-by-bit over time as, contrary to the sales and the income tax, which can swing more dramatically with economic conditions. This information blog (3 Minutes 14 seconds reads) is committed to educating readers about prevailing property tax policies and practices in the country.

 

Is property tax applied on the file?

Property tax is not applied on the file; instead, it is applied on possession or ownership. The property which has a good tax record is considered to be a legal property; otherwise, it will be considered an illegal/Black Asset.

 

How does a Property File become a Possession?

When you start paying Installments of the property after the balloting, then gradually ownership and possession of the property get transferred to your name.

Let’s understand these real estate terminologies.

What is a Plot File?

The documented assurance, to a particular property investor, about a piece of land which have a certain size and location, in the existing housing society in a specific area.

 

What is the Balloting?

The process of allocating the plot numbers in a specific real estate project to the upcoming buyers. It is a luck-based draw among several applicants for a particular plot.

 

Property Tax Policy; A brief overview

Following are the three generalized tax categories that fall under the property tax in Pakistan.

 

• Capital value tax (CVT)
• Withholding tax (WHT)
• Capital gain tax (CGT)

 

 

Capital value tax (CVT) 

Any tax which is applied on the sale and transfer of any immovable (Plot, House, Commercial Buildings, etc.) Property is called capital Value Tax. The rate of the Capital value tax (CVT) is determined by the Federal Board of Revenue (FBR). It can be varied, depending on the type of property being sold or transferred and the declared value of the property. According to the Federal Act of 2006, the property tax on the sale and transfer of immovable property will be 2 % for the filer. It will be charged at the rate of 7 % to the Non-Filer.

 

Who decides the value of the taxable Immovable property?

The Capital value tax (CVT) is always applied only on the DC-Deputy Commissioner rate (of the specified District /area). Tax is not applied on the rate of the property, decided by the Housing Society.

 

Withholding tax (WHT)

 The tax which is to be paid at the time of making a property deal (When you are scheduling the sales deeds) is called Withholding tax. It is paid by the purchaser of the property before the transfer of the possession/ownership rights. The revised Withholding tax rate after the federal Budget 2022-23 for the entire three segments of the real estate sector is applicable from July 1, 2022. The revised rate is as follows;

• The (WHT) for the Plots and files sector is 1 %.
• The (WHT) for the construction sector is 1.5 %.
• The (WHT) for the HiRISE Apartments sector is 2 %.

 

Capital gain tax (CGT)

 The tax which is imposed on the profit earned by sales of a capital asset is called the Capital gain tax.

After the revision in the federal Budget 2022-23, the Capital gain tax for all three segments of the real estate sector is applicable as;

 

• The (WHT) for the Plots and files sector is 5 %.
• The (WHT) for the construction sector is 10 %.
• The (WHT) for the HiRISE Apartments sector is 15 %.   

 

 

 

 

Who is exempted from the property tax?

According to the Federal Act of 2006, if your property falls in any of the below-mentioned categories, you are exempted from property tax.

 

• Residential houses constructed on the plot fewer than the 5 Marla Size (Other than the locality of Category “A”)
• The property is unable to generate annual rent exceeding the amount of 4,320/-
• The property owned by the widows, minors, and/or disabled persons in the tax liability of worth PKR 12,150
• A Residential hose of 1 kanal area owned /occupied by the federal/provincial Government Servant (Retired).
• The buildings /properties owned by the Government authorities/Corporations.
• The property on which Mosque and other religious buildings are situated.
• The properties of Public interest I-e Government Parks, Schools, Playgrounds libraries, and hospitals.

About Rebates 

 Rebates are the incentives that government lays out to taxpayers as per their will.

For instance, the Punjab government used to rebate an amount equivalent to 5 % of the tax amount for paying the tax on time and in a lump sum. The purpose is to ensure well-timed and orderly tax collection.

Mandatory Disclaimer 

 The tax valuation rates used in this blog are just a precedent, taken from the government website. We do not guarantee their accuracy. The examples are only used to guide the readers, so please consult the relevant authorities for up-to-the –minute’s tax rates.