Capital gains tax not applicable on properties purchased before July 1, 2024

ISLAMABAD: The Federal Board of Revenue (FBR) has announced that the concept of holding period has been eliminated for immovable properties acquired on or after July 1, 2024 through the Finance Act 2024.

Properties purchased on or after July 1, 2024 will be subjected to a gain tax at the rate of 15 per cent for filers and higher for non-filers.

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However, FBR has explained that properties bought before July 1 will be governed by old formula.

According to an income tax circular issued by the FBR, the gain arising on the disposal of immovable property situated in Pakistan will now be chargeable to tax under the head of capital gains, at the rates specified in the First Schedule.

Prior to the Finance Act 2024, the gain was taxed based on the holding period, with a maximum rate of 15 per cent where the holding period was less than a year for open plots, constructed properties, and flats.

The rate decreased as the holding period increased, reaching zero per cent for plots held for more than six years, as well as for constructed properties held for more than four years, and for flats held for more than two years.

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However, through the Finance Act 2024, the concept of holding period has been eliminated for properties acquired on or after July 1.

The gain arising from the disposal of these properties will be taxed at a flat rate of 15 per cent for persons appearing on the Active Taxpayers List (ATL) on the date of the property’s disposal. – INP