Property tax in Pakistan is a tax that is owned by an individual or another legal entity, such as a corporation. Property taxes are paid by the property owner calculated by the government on property value and location basis.
Before going into the changes in property tax for the year 2019-20, the government has done, we need to understand what kind of taxes apply in Pakistan.
Types of Tax:
Basically, there are four types of tax:
• Capital Gains Tax
• Capital Value Tax
• Stamp Duty
• Withholding tax
Concept Of Tax Year:
Basically, the tax year is 12 months but for different from the year that starts in January and ends in December. The tax year 2019 starts from 01 July 2018 to 30 June 2019. The tax year ends on June 30. The tax year 2020 begins on July 1, 2019, and ends on June 30, 2020.
Amount of Tax Needs to Pay While Selling A Property:
When you are selling property in Pakistan, you will need to pay capital gains tax on the profit.
Capital Gain tax:
This is the tax that the seller has to pay. When the seller makes a profit when selling the property, it is the same capital that is taxable. Capital gains tax is levied when the property is sold within three years of purchase.
For the first year, a 10% tax is paid, while in the second-year sales are taxed at 7.5% and in the third year at 5%. Profitable tax collection is calculated with reference to the appropriate market value. If the property has been held for more than three years, the seller will not pay capital gains tax.
Amount of Tax Needs to Pay While Buying A Property:
Different types of tax need to pay while purchasing a property in the year 2019-2020 are mentioned below:
Capital Value Tax:
A provincial tax paid by the buyer while buying a property is known as capital value tax. Capital value tax is payable on the value of the asset acquired. According to the Finance Act, 2006, capital value tax is levied at the rate of 2% of the recorded value.
According to the new budget 2019-2020, the federal government has supported the abolition of DC rates. Currently, the total capital value tax for the urban property is 2%.
Stamp duty is a tax on a legal document when buying a property. Basically, stamp duty is levied at 3% of the property’s DC rates.
Withholding Tax (WHT):
Withholding tax is very important. This is the federal tax that buyers and sellers have to pay when dealing with property paid at the time of the property deal
Withholding Tax for Buyer:
An individual who is an income tax filer is buying a property that has to pay a 2% holding tax and non-filers have to pay 45% tax.
People who are buying property need to pay tax only if the value of the property is more than Rs 4 million.
Withholding Tax For Seller:
If the seller of the property is an income tax filer then he has to pay a 1% tax whereas non-filers have to pay 25% tax. This rule has been passed so that more people can file income tax every year.