The government has proposed significant changes in the tax framework of the capital gain on immovable properties under the federal budget for the fiscal year 2022-23.
Unveiling the federal budget for FY23 in his budget speech, Finance Minister Miftah Ismail said that the government intends to develop a system where assets of all classes are taxed equally.
During his speech, the finance minister proposed to levy a 15 percent tax on the capital gain of immovable properties located in Pakistan in case of a holding period of up to one year, which is subsequently reduced by 2.5 percent per annum. He said if the holding period goes beyond six years, then the tax will be zero, i.e. 12.5% after two years of holding and so on.
Under the new budget, Miftah proposed to increase the rate of advance tax on the sale and purchase of property for filers from the current rate of 1 percent to 2 percent. For non-filers, he proposed to increase the advance tax rate to 6 percent.
The minister added that individuals who have more than one immovable property worth more than Rs. 25 million in Pakistan, a 5 percent of fair market value will be assumed as its income. “As a result, a tax rate of 1% will be effective on this assumed income”.
However, private homes will be exempt from this tax,” he said.
