Budget 2024-25 Increases Capital Gains Tax on Real Estate to a Minimum of 15%

The 2024-25 budget has introduced significant changes to the taxation regime for capital gains, particularly affecting immovable property such as real estate. These changes aim to simplify the tax structure and potentially increase revenue from property transactions.

The government is expecting an increase in tax revenue of over Rs. 60 billion with this new regime.

Proposed Changes for 2024-25:

Starting July 1, 2024, the government has proposed a major overhaul in the capital gains tax system for assets and shares, including immovable property. The new system introduces a flat tax rate on everyone and eliminates the benefits associated with longer holding periods which used to benefit the common man and tax businessmen. The proposed changes are as follows:

  • For assets acquired on or after July 1, 2024: A flat tax rate of 15% will be applied to all filers, regardless of the holding period.
  • For non-filers: Tax will be imposed at the standard slab rates from 15% to 45%, again irrespective of the holding period.

This uniform rate aims to simplify the tax system and potentially discourage speculative short-term investments in the property market.

Current Taxation Structure:

Under the current regime, capital gains from the disposal of immovable property are taxed based on the holding period. The longer you hold the property, the lower your tax rate. The applicable tax rates are tiered as follows:

  • 1 year holding period: 15%
  • 2 years holding period: 12.5%
  • 3 years holding period: 10%
  • 4 years holding period: 7.5%
  • 5 years holding period: 5%
  • 6 years holding period: 2.5%
  • After 6 years: 0%

This current tiered approach encourages long-term holding of property by reducing the tax burden over time thus taxing the real-estate-related businessmen more than the common man who sells their property in times of need.

Comparison of Current and Proposed Tax Slabs:

Holding Period Current Tax Rate Proposed Tax Rate (Filers) Proposed Tax Rate (Non-Filers)
1 year 15% 15% 15% – 45%
2 years 12.5% 15% 15% – 45%
3 years 10% 15% 15% – 45%
4 years 7.5% 15% 15% – 45%
5 years 5% 15% 15% – 45%
6 years 2.5% 15% 15% – 45%
After 6 years 0% 15% 15% – 45%

Impact on Real Estate Transactions:

The shift to a flat 15% tax rate on immovable property aims to standardize the tax burden regardless of how long the property is held. This change will likely have several impacts:

  1. Increased Revenue: The government expects to raise an additional 60 billion in revenue due to this uniform tax rate.
  2. Investment Decisions: Investors may now reconsider their strategies, as holding property for longer periods no longer provides tax advantages.
  3. Market Dynamics: The change could lead to less frequent transactions, as the overall taxation is increasing for the market.

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  • Filers wht rate should be zero after ten years … govt encourages non filers

  • This finance minister is a foreigner and an IMF agent. Shame on us that we can not Pakistani among 220 million to look after our finances.
    Why people should pay capital gain on their main residence? Having a flat 15% capital gain tax on property and shares, favors big investors and penalises small investors. Tradres who earn billion from property and share trading should be paying much higher rates. Treat capital gain as income except one main residence and tax it higher rate income tax rate or 45%.
    And what about capital gain on agriculture land; big landlords are again protected. Apply same capital gain tax on agriculture land.

  • How capital gain will be measured? Pakistani rupee devaluation between the purchase and sale of immovable property should be incorporated for the evaluation of capital gains. Otherwise, this tax is a total injustice to the people of Pakistan, especially, for the salaried class. Which is the biggest victim of this tax regime.
    Second question, why filers have to pay any advance or WHT while purchasing of different assets, for which they are already using their money on which full Income tax is already deducted. This is shear injustice to salaried class filers.

  • according to information mentioned above in the article, currently cgt is 3% for filers and 6% for non filers, holding period does not make any impact. Thus, info above is not correct

  • Will this law will be applies to every property or only to those whichwill be purchased after 1 july 2024?

  • کیپیٹل گین ٹیکس جیسے کہ الفاظ سے واضح ہے کہ کوئی بھی فائدہ جیسے آپ پراپرٹی کی فروخت سے حاصل کر رہے ہیں تو اس فائدے پہ آپ کو ٹیکس دینا ہو گا ،مگر جیسا کہ پراپرٹی کے حالات کا سب کو علم ہے کہ نقصان میں ہے تو کیا فر بھی گین ٹیکس بنتا ہے ،؟؟؟

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