The Budget 2024-25 in Pakistan proposes significant changes to the taxation of real estate and property, impacting both filers and non-filers. Here’s a detailed breakdown of the key changes:

Capital Gain Tax on Real Estate

Currently, the capital gain tax on immovable property depends on the holding period (1 to 6 years) of the plot/flat/constructed property. After 6 years, there was no tax. The new proposal changes this:

  • For Filers: A flat 15% capital gain tax irrespective of the holding period.
  • For Non-Filers: A steep 45% capital gain tax.

This new rate applies to properties acquired on or after July 1, 2024. Properties acquired on or before June 30, 2024, will follow the previous structure based on the holding period.

Progressive Withholding Tax on Transfer of Immovable Property

Currently, a 3% tax is applied to filers and 6% to non-filers on the purchase of immovable property. The new proposal introduces a progressive tax system with different rates based on the property value and taxpayer status:

Purchase of Immovable Property (Section 236K):

Taxpayer Property Value Up to Rs 50 Million Property Value Rs 50-100 Million Property Value Above Rs 100 Million
Filers 3% 3.5% 4%
Late/Delayed Filers 6% 7% 8%
Non-Filers 12% 16% 20%

Sale of Immovable Property (Section 236C):

Taxpayer Property Value Up to Rs 50 Million Property Value Rs 50-100 Million Property Value Above Rs 100 Million
Filers 3% 4% 5%
Late/Delayed Filers 6% 7% 8%
Non-Filers 10% 10% 10%

Federal Excise Duty (FED) on Immovable Property

To stabilize the real estate sector and avoid speculation, a 5% FED is proposed on new plots, residential, and commercial properties. Specifically:

  • Commercial Properties and First Sale of Residential Properties: 5% FED.

Objectives and Impact

The government aims to document the economy, promote transparency in the real estate sector, and generate substantial revenue. This move is expected to:

  1. Encourage Compliance: Higher taxes for non-filers incentivize them to become filers.
  2. Increase Transparency: Formal documentation reduces illicit transactions.
  3. Boost Revenue: The new tax rates aim to raise Rs 477.11 billion, aiding economic stability.

The 2024-25 budget’s property tax hike represents a significant step towards economic reform in Pakistan. The differentiated tax rates based on filer status aim to bring more taxpayers into the formal economy, promoting fairness and transparency in the real estate market.

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