Islamabad: The 2024-25 budget has introduced significant changes to the capital gains tax regime, particularly affecting real estate, as reported on June 13.
These changes aim to simplify the tax structure and increase revenue from property transactions. The government expects these changes to boost tax revenue by over PKR 60 billion. Starting July 1, 2024, the government will implement a major overhaul of the capital gains tax system for assets, including real estate. The new system will introduce a flat tax rate for all filers and eliminate the benefits of longer holding periods, which previously benefited ordinary citizens and taxed businessmen. The proposed changes include:
For assets acquired on or after July 1, 2024, a flat tax rate of 15% will be applied to all filers, regardless of the holding period.
For non-filers, the tax will be imposed at standard slab rates ranging from 15% to 45%, regardless of the holding period.
Under the current regime, capital gains from the sale of immovable property are taxed based on the holding period. The longer you hold the property, the lower the tax rate. The current tax rates are as follows:
1 year holding period: 15%
2 years holding period: 12.5%
3 years holding period: 10%
4 years holding period: 7.5%
5 years holding period: 5%
6 years holding period: 2.5%
After 6 years: 0%
This tiered approach encourages long-term holding of property by reducing the tax burden over time, thus taxing real-estate-related businessmen more than ordinary citizens who sell their property in times of need.
