When you sell a property in Pakistan — like a plot, house, flat or commercial building — you may want to pay capital gain tax on property in Pakistan (CGT) on the profit you make. Sellers need to understand CGT, as mistakes or failure to pay result in fines. Planning correctly can help you legally pay the correct amount of tax. The government is paying closer attention to ensuring property transactions are clear and documented.
Since rules and rates can change, check the up-to-date information from the Federal Board of Revenue (FBR) before each sale. This old item clarifies what CGT is, how it is calculated, exemptions, common errors, and other important points about real estate tax in Pakistan.
What Is Capital Gain Tax on Property?
When you sell a property for more than you paid for it, the additional money you earn is known as a capital gain. CGT on the sale of property is the tax you pay on this profit. It is not the same as other property taxes such as stamp duty or capital value tax (CVT) which are based on the property's value, not the profit. In Pakistan, CGT on sale of property is collected by the Federal Board of Revenue (FBR) below the Income Tax Ordinance, 2001.
Key Points:
· CGT is just on the profit, not the full property price.
· CVT is charged on the property's market value.
· Calculating CGT on the sale of property appropriately avoids fines.
· CGT rates can change liable on how long you owned the property.
Knowing about CGT on the sale of property helps you follow the law and plan your finances well when selling property in Pakistan.
When Does Capital Gain Tax Apply?
Capital Gain Tax (CGT) is charged when you sell or transfer property in Pakistan. This includes:
· Plots, houses, apartments and flats
· Buildings or other constructed property
· Commercial property sold for profit
Previously, the tax was based on the holding period for capital gain tax, meaning how long you owned the property. If you bought the property on or before 30 June 2024, the old system which is based on holding time, still applies. If you purchased it on or after 1 July 2024, the holding time doesn't matter. CGT is charged at a flat rate or is liable based on your filer status. Short-term and long-term property ownership affected tax rates in the old system.
How Is Capital Gain Calculated on Property?
Property capital gain calculation displays how much profit you create when selling a property and how much tax you may want to pay.
The formula is:
Capital Gain = Sale Price – (Purchase Price + Expenses)
Sale Price: The money the consumer pays you.
Purchase Price: The money you originally paid for the property.
Expenses: Agent fees, transfer fees, legal charges or property improvements.
Example: You bought a house for PKR 9,000,000 and sold it 2.5 years later for PKR 12,000,000. You spent PKR 300,000 on fees.
Capital Gain = 12,000,000 – (9,000,000 + 300,000) = PKR 2,700,000
Once you find the gain, the CGT rate is applied based on how long you owned the property and your filing status.
CGT Rates on Property in Pakistan
Capital Gain Tax (CGT) is the tax you pay on the profit when you sell a property in Pakistan. The rates have changed over time, so it's essential to recognize both the old and the new rules.
Old Regime (Properties bought on or before 30 June 2024)
Under the old rules, CGT depended on how long you owned the property. The longer you kept it, the less tax you paid. Some properties became completely tax-free after a certain number of years.
| How Long You Owned | Open Plots | Houses / Buildings | Flats / Apartments |
|---|---|---|---|
| Up to 1 year | 15% | 15% | 15% |
| 1–2 years | 12.5% | 10% | 7.5% |
| 2–3 years | 10% | 7.5% | 0% |
| 3–4 years | 7.5% | 5% | 0% |
| 4–5 years | 5% | 0% | — |
| 5–6 years | 2.5% | — | — |
| More than 6 years | 0% | — | — |
The old system encouraged people to hold on to property for a long time to pay less tax.
New Regime (Properties bought on or after 1 July 2024)
The new rules are simpler. Now, how long you keep the property does not matter. What matters instead?
· Whether you are on the Active Taxpayer List (ATL)
· Your filer status (registered taxpayer) may disturb the tax rate, but ATL taxpayers typically pay a minimum of 15%
This system makes things simpler but removes the advantage of paying less tax for holding property longer.
FBR Valuation, DC Rate & Market Value
When you sell property in Pakistan, the authorities check your sale price against official rates to ensure the correct tax is paid. It's essential to keep the proper documents, such as the sale agreement, registry deed, and evidence of payment. Declaring a lower price than the genuine price can lead to higher taxes and penalties under Pakistan's real estate tax rules.
Key points:
FBR property valuation rates: Standard rates set by the Federal Board of Revenue for changed areas to calculate taxes.
DC rate vs FBR rate: Local development (DC) rates may be changed from FBR rates; typically, the higher rate is used for tax purposes.
Market value: The real price agreed by the buyer and seller; FBR associates this with official rates to avoid under-reporting.
Reporting a lower value can result in higher taxes and fines, so declare the correct price each time.
Knowing about FBR property valuation rates, DC rates vs FBR rates, and real estate tax in Pakistan helps sellers follow the rules and avoid complications.
Exemptions & Relief in Capital Gain Tax
Previously, in July 2024, you could get a full exemption from Capital Gain Tax if you held a property long enough—open plots for over 6 years, houses or buildings for over 4 years, and flats for over 2 years. But for properties bought on or after 1 July 2024, these exemptions no longer apply. At the moment, there is no official Primary residence CGT relief, and any probable relief must be checked with the FBR.
How to Pay Capital Gain Tax on Property?
Paying Capital Gain Tax (CGT) in Pakistan is simple if you follow the steps. First, find your capital gain by subtracting the purchase price and any allowed expenses from the sale price. Then, use the right CGT rate based on how long you owned the property or when you bought it.
Typically, the tax is taken by a registrar, bank or housing authority when you transfer the property. This tax is sent to the Federal Board of Revenue (FBR). Later, you should report the sale and the gain on your yearly income tax return to ensure your tax is correct.
Steps to Pay CGT:
· Capital Gain = Sale Price – (Purchase Price + Allowed Expenses)
· Apply the correct CGT rate
· Tax is deducted by the registrar, bank or housing authority
· Deposit the tax with FBR
· Report the sale and gain in your yearly tax return
Having complete property tax documentation supports compliance with Pakistan's property tax rules for income tax.
Capital Gain Tax for Overseas Pakistanis
Overseas Pakistanis selling property in Pakistan must pay Capital Gains Tax (CGT), just like local residents, as the tax is levied on income from property in Pakistan. To make the procedure easy, it's best to get assistance from a tax expert particularly if handling the sale from abroad. If the seller cannot be there in person, a proper Power of Attorney is required to complete paperwork and registration. Also, make sure the bank or registrar deducts and pays the correct CGT to avoid fines or difficulties with tax authorities.
Common Mistakes & Risks
Many people make mistakes when paying Capital Gain Tax (CGT) on property in Pakistan. These errors can result in fines, additional taxes or complications with the FBR. Having good records and following to instructions helps avoid concerns.
Common mistakes include:
· Not having records of property purchases or improvements.
· Declaring a lower sale rate to pay less tax.
· Confusing withholding tax vs capital gain tax.
· Using old FBR or DC property rates.
· Not filing your yearly tax return, and even later paying CGT.
FAQs – Capital Gain Tax (CGT)
Do I have to pay CGT if I sell my main home?
Right now, there is no distinct exemption for main dwellings. CGT applies like any other property.
Is CGT taken automatically?
Yes, typically, somebody like the bank or registrar deducts it. But you still want to report it on your tax return.
What if I sell property at a loss?
If you don't make a gain, no CGT is due. Have proof of the loss.
Does CGT apply to inherited property?
Yes, tax is on the gain between the sale price and the value when you inherited it.
Do I still need to file a tax return if CGT was already deducted?
Yes, filing is still required to make it all official.
Final Thoughts
In short, Pakistan's property tax has changed, so it's essential to understand the guidelines. Before selling, check to whether you qualify for the Capital Gain Tax exemption in Pakistan and the exact tax rates. Keep all key papers, such as purchase deeds, receipts, registry documents and bills for any improvements. Know when you bought the property as old or new rules may apply. If you live abroad, get expert help to ensure the sale is handled correctly. By remaining organized and informed, you can properly pay tax on the sale of a house in Pakistan, avoid fines and make the sale smooth and trouble-free.
Read More: How to Pay Your CDA Property Tax Bill