Islamabad: The Federal Board of Revenue (FBR) has issued a circular to clarify amendments made in the Income Tax Ordinance 2001 through the Finance Act 2019, under which three new brackets have been added to the income received from rental property and the taxes for the highest bracket have been raised to 35%.
The amendments made to the calculation of Capital Gains Tax (CGT) have also been clarified. Similarly, the income tax brackets for salaried classes have also been amended. Now, only salaried individuals with an annual income of PKR 600,000 or higher will be liable to pay income tax.
According to the details, no taxes will be applicable on annual rental income if the total is less than PKR 200,000. The table below provides the complete details of taxation on rental income:
Total Annual Rent
Tax Rate
PKR 200,000 or less
0
PKR 200,000—600,000
5%
PKR 600,000—1,000,000
PKR 20,000 + 10% of the amount exceeding PKR 600,000
PKR 1,000,000—2,000,000
PKR 60,000 + 15% of the amount exceeding PKR 1,000,000
PKR 2,000,000—4,000,000
PKR 210,000 + 20% of the amount exceeding PKR 2,000,000
PKR 4,000,000—6,000,000
PKR 610,000 + 25% of the amount exceeding PKR 4,000,000
PKR 6,000,000—8,000,000
PKR 1,110,000 + 30% of the amount exceeding PKR 6,000,000
PKR 8,000,000 or higher
PKR 1,710,000 + 35% of the amount exceeding PKR 8,000,000
Similarly, according to the explanation of Capital Gains Tax (CGT), the total annual gains from the sale of property each year will be counted towards the calculation of CGT. So, here’s how CGT will now be calculated:
Where the annual gains (from disposal of immovable property) are less than PKR 5 million: 5% of the gains will be taxed as CGT.
Where the annual gains exceed PKR 5 million, but do not exceed PKR 10 million: 10% of the gains will be taxed.
Where annual gains exceed PKR 10 million, but do not exceed PKR 15 million: 15% of the gains will be taxed.
Where annual gains exceed PKR 15 million: 20% of the gains will be taxed.
Additionally:
100% of the gains will be counted as taxable if the property is sold within the first year of purchase;
75% of the gains will be counted as taxable, if sold after the first year.
Finally, CGT will not be collected:
If constructed property is sold after four years of purchase.
If the plot is sold after eight years of purchase.
