New Capital Gains Tax rates apply from July 1, 2026, with tax varying by acquisition date, holding period, property type and Active Taxpayers’ List status.
ISLAMABAD: The Federal Board of Revenue (FBR) has notified the Capital Gains Tax (CGT) rates applicable to the disposal of immovable properties for Tax Year 2027, effective from July 1, 2026, following the release of the updated Income Tax Ordinance, 2001 incorporating amendments introduced through the Finance Act, 2026.
The revised provisions, issued under Section 37(1A) of the Income Tax Ordinance, prescribe different Capital Gains Tax rates based on the property’s acquisition date, holding period, type of property and whether the seller appears on the Active Taxpayers’ List (ATL).
Capital Gains Tax rates for properties acquired on or before June 30, 2024
For immovable properties acquired on or before June 30, 2024, the applicable Capital Gains Tax rates are determined by both the holding period and the type of property.
Owners of open plots will pay 15% CGT if the property is sold within one year of acquisition. The rate falls to 12.5% where the holding period exceeds one year but does not exceed two years, 10% after two years, 7.5% after three years, 5% after four years, 2.5% after five years and becomes nil once the property has been held for more than six years.
For constructed properties, the tax rate is 15% where the holding period does not exceed one year. It reduces to 10% after one year, 7.5% after two years, 5% after three years and becomes exempt after the property has been held for more than four years.
Flats receive the most favourable treatment under the revised regime. A 15% Capital Gains Tax applies where a flat is sold within one year, falling to 7.5% where held for more than one year but not more than two years. No Capital Gains Tax will apply where the flat has been held for more than two years.
Tax treatment for properties acquired on or after July 1, 2024
For properties acquired on or after July 1, 2024, the FBR has maintained a flat 15% Capital Gains Tax for sellers appearing on the Active Taxpayers’ List on the date of disposal.
Where the seller does not appear on the ATL, individuals and Associations of Persons (AOPs) will be taxed at the applicable rates prescribed under Division I of the First Schedule to the Income Tax Ordinance, while companies will be taxed under Division II of the First Schedule.
The FBR has clarified that the tax payable by individuals and AOPs not appearing on the Active Taxpayers’ List cannot be less than 15% of the capital gain.
Differential tax treatment remains
The updated Capital Gains Tax regime continues to distinguish between open plots, constructed properties and flats acquired before July 1, 2024, providing incentives for longer holding periods.
Under the revised framework, flats become exempt from Capital Gains Tax after being held for more than two years, while constructed properties qualify for exemption after four years. Open plots, however, become fully exempt only after a holding period exceeding six years.
The FBR said the revised tax provisions are intended to provide clarity regarding the taxation of property transactions while encouraging longer-term investment in the real estate sector.
The notified Capital Gains Tax rates form part of the updated Income Tax Ordinance, 2001, as amended through the Finance Act, 2026, and are applicable for Tax Year 2027 beginning July 1, 2026. Property sellers, tax practitioners and withholding agents have been advised to apply the revised provisions when calculating tax liabilities arising from the disposal of immovable properties.