How to Declare Capital Gain Tax on Sale of Property

Declaring Capital Gains Tax when selling property in Pakistan means following the new rules of the Income Tax Ordinance 2001, which has been changed. Here is a guide on declaring capital gain tax on property sales in Pakistan.

Table of Contents HIDE

1 What is Capital Gains Tax?

2 Step-by-Step Guide to Declaring Capital Gain Tax on Property Sale

3 Capital Gain Tax Rates 2024-25

4 How to Pay Capital Gain Tax?

5 Latest Rules and Updates

6 Final Tips

What is Capital Gains Tax?

It is a tax imposed on the capital gain realized in the sale of a property. The tax will depend on the time the property has been owned and the amount of profit realized (sale price minus the purchase price).

Step-by-Step Guide to Declaring Capital Gain Tax on Property Sale

1. Determine the Holding Period

The holding period impacts the Capital Gain Tax rate:

Owned up to 1 year: Full Capital Gain Tax applies.
Owned for 1-3 years: Reduced Capital Gain Tax rate based on holding period.
Owned over 3 years: No Capital Gain Tax for immovable property.

2. Calculate the Gain Amount

Subtract the purchase price (including documented costs like registration fees and stamp duty) from the sale price. Example:

Sale Price: PKR 10,000,000
Purchase Price: PKR 8,000,000
Capital Gain: PKR 2,000,000

3. Apply the Tax Rate

For 2025, the Capital Gain Tax rates are:

15% for filers (if held for less than 1 year).
Gradual reduction for holding between 1-3 years.
Non-filers pay higher rates.

4. Include in Your Tax Return

Log into the FBR IRIS portal.
Go to the “Income from Capital Gains” section in your annual tax return.
Enter the sale details, including the property type, holding period, and gain amount.
The system will calculate the Capital Gain Tax payable based on your input value.

5. Adjust for Any Exemptions

Certain exemptions apply, such as:

Primary Residence: If the property was your main residence, it may be exempt from Capital Gain Tax.
Inherited Property: Gain on inherited property is generally exempt unless sold after inheritance.

6. Pay the Capital Gain Tax

Once declared in your tax return, pay the calculated Capital Gain Tax before filing. You can use the PSID generated on the FBR portal to make a payment through a bank.

Capital Gain Tax Rates 2024-25

Capital gains tax rates in Pakistan vary depending on the holding period of the asset. The holding period refers to the length of time an asset was held before it was sold. The tax rates for immovable property are as follows:

If the holding period is less than one year, @ 15%
If the holding period is more than one year but less than two years, @ 12.5%
If the holding period is more than two years but less than three years, @ 10%
If the holding period is more than three years but less than four years, @ 7.5%
If the holding period is more than four years, but less than five years, @ 5%
If the holding period is more than five years, but less than six years, @ 2.5%
Where the holding period exceeds six years @0%

How to Pay Capital Gain Tax?

If you have a capital gain, you are required to file a return with the Federal Board of Revenue (FBR) and pay a capital gains tax on this gain. You will have the option of filing this online or via the nearest tax office.

To file tax returns, you have to provide data about the asset such as its purchase price, selling price, how long it was owned, and any costs to acquire. You’ll also need to calculate the Capital Gains tax owed and pay it online or bank-in.

Latest Rules and Updates

As per the latest amendments:

Revised Rates: Tax rates on gains vary based on the updated holding period table in the Finance Act.
Non-Filers Penalty: Non-filers face higher Capital Gain Tax rates and limited exemptions.
Filing Deadline: Ensure you declare the Capital Gain Tax in your tax return by the annual due date (usually September 30).

This video guide will also help you understand the Capital Gain Tax in Pakistan.

Final Tips

Keep all paper evidence on property acquisition and disposition, such as agreements, receipts, and tax deductions.
Consult a tax advisor if unsure about specific exemptions or calculations.

Adherence to compliance and precision in filing can help avoid penalties and ensure smooth property transactions. Do not hesitate to ask should you require further clarification.

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