Islamabad, June 12, 2024 – Pakistan government, through the Finance Bill 2024, has introduced significant income tax changes on transactions involving immovable properties.
The measures, part of the 2024-25 budget unveiled on Wednesday, are aimed at generating substantial revenue and increasing tax compliance in the real estate sector.
Progressive Tax Rates
The Finance Bill outlines progressive tax rates for the purchase and sale of properties, categorized into three groups: filers, late-filers, and non-filers.
Purchases:
Filers:
– Properties up to Rs. 50 million: 3%
– Properties between Rs. 50 million and Rs. 100 million: 3.5%
– Properties above Rs. 100 million: 4%
Late-Filers:
– Properties up to Rs. 50 million: 6%
– Properties between Rs. 50 million and Rs. 100 million: 7%
– Properties above Rs. 100 million: 8%
Non-Filers:
– Properties up to Rs. 50 million: 12%
– Properties between Rs. 50 million and Rs. 100 million: 16%
– Properties above Rs. 100 million: 20%
Sales:
Filers:
– Properties up to Rs. 50 million: 3%
– Properties between Rs. 50 million and Rs. 100 million: 4%
– Properties above Rs. 100 million: 5%
Non-Filers:
– Properties of any value: 10%
Late-Filers:
– Properties up to Rs. 50 million: 6%
– Properties between Rs. 50 million and Rs. 100 million: 7%
– Properties above Rs. 100 million: 8%
Gains from Disposal
For gains derived from the disposal of immovable property acquired on or after July 1, 2024, a flat tax rate of 15% is proposed for filers, regardless of the holding period. Non-filers will be subjected to progressive tax rates according to the prescribed slabs, with a minimum tax rate of 15%.
Objective and Impact
The revised tax structure aims to:
* Increase Revenue: By imposing higher tax rates on property transactions, the government expects to significantly boost revenue.
* Promote Compliance: Differentiated tax rates for filers, late-filers, and non-filers are designed to encourage timely and accurate tax filing.
* Curb Speculation: The heavy taxes on property transactions may help in reducing speculative investments in the real estate market, promoting more stable property prices.
The new tax measures on immovable property transactions highlight the government’s strategy to enhance fiscal discipline and expand the tax base. These changes are expected to have a profound impact on the real estate sector, compelling taxpayers to comply with tax regulations and contributing to the national exchequer. As the new fiscal year approaches, stakeholders in the real estate market will need to adjust to these significant changes in the tax landscape.