CVT Imposed on Farmhouses, Residential Houses in Islamabad

CVT Imposed on Farmhouses, Residential Houses in Islamabad

Islamabad, June 29, 2024 – The government has imposed a capital value tax (CVT) on farmhouses and residential houses within the territorial limits of Islamabad Capital Territory, as outlined in the Finance Act, 2024.

Tax experts at A. F. Ferguson Chartered Accountants explained that the CVT has been introduced on farmhouses and residential houses based on their area, regardless of their market value. The specifics of the new tax are as follows:

1. Farmhouses: Defined in Section 7E of the Income Tax Ordinance, 2001, farmhouses will be taxed at a rate of Rs 500,000 for those with an area between 2,000 square yards and 4,000 square yards. For farmhouses exceeding 4,000 square yards, the tax rate will be Rs 1 million.

2. Residential Houses: The CVT rate for residential houses will be Rs 1 million for houses with an area between 1,000 square yards and 2,000 square yards. For houses exceeding 2,000 square yards, the tax rate will be Rs 1.5 million.

According to the experts, the CVT for the aforementioned properties will be payable when the income tax return for the tax year is due, following the manner prescribed by the relevant authorities.

This move is part of the government’s broader strategy to enhance revenue generation and bring more properties under the tax net. The imposition of CVT based on property area aims to ensure a more equitable tax system, targeting high-value properties that have previously been under-taxed or untaxed.

The introduction of CVT is expected to have significant implications for property owners in Islamabad, particularly those owning large residential plots and farmhouses. While this measure is aimed at boosting government revenue, it may also lead to increased costs for property owners, prompting them to reassess their property holdings and financial planning.

As the implementation of this new tax unfolds, its impact on the real estate market in Islamabad will be closely monitored. Stakeholders, including property owners and real estate developers, will need to adapt to this new tax regime and ensure compliance to avoid penalties.

Overall, the imposition of CVT on farmhouses and residential houses in Islamabad represents a significant policy shift aimed at broadening the tax base and ensuring fairer contribution from property owners.