Property Tax in Pakistan 2020-2021 is easy to comprehend and submit through concerned departments without any hassle, that is because we bring you the best understandable blog on how to pay your taxes in due time.
Have you ever deliberated that what is a property tax? A property tax is a kind of tax that the owner has to pay to the government on the value of the property that is usually levied on the real estate. Let`s take a break for a second, and consider the attributes of a good citizen.
So, among other factors, paying taxes is one of the top ones. Tax is rent to the State for the welfare purpose of the community. How many times, thought to bring positive change has come across your mind, we bet many times throughout your life.
So, paying taxes is a sacred duty of people living in a society. Taxes contribute to the development of a country. Paying taxes makes a person a responsible citizen. This assists in the growth and development of society. Becoming a responsible citizen is not an impossible task, we step like these it is easily achievable.
The collection of taxes is a positive indicator for the economy. Taxes are applied to improving the living standards of citizens. Taxes are collected to deliver people-centric services in a better way. If we truly desire to make our country great and competing with other giant economies, then we should avoid tax evasion and if someone commits this offense then it is a crime and disloyalty to your country.
Property taxes are different in every country and city. It varies from city to city. If you are living in Rawalpindi, then the tax rates will be different than the person living in Islamabad.
Similarly, the housing societies which lie under the jurisdiction of the Rawalpindi Development Authority will have a different amount of tax than the societies in the jurisdiction of the Capital Development Authority. These differences may also influence the plot prices.
Other factors involved in the diversity of the taxes are such as the size and the location of the plot, the current market rate of the taxes of property, economic conditions of the country, etc.
According to the recent stats, the government is charging around 5% to 20% of the Capital Gains Tax. But in recent Coronavirus lockdown situations, the government has extended property tax concessions. This means that if a person wants to sell his house then he is exempted to pay the Capital gains Tax. It was also decided by the concerned authorities that property-related taxes might be reduced.
What is a Property Tax?
Not many people are aware of the property tax and its details in Pakistan. Let us elaborate on it for your comprehensive understanding. A property tax is a sort of tax that the landlord has to pay to the government authorities on the worth of the property that is usually imposed on the real estate.
In Pakistan, property tax lies under the authority of the Provincial government that is imposed on an annual basis. This tax is based on the urban immobile tax Acts. Tax prices could be different for every province and territory units of Pakistan.
Do not commit a mistake to consider that only houses fall under the property tax. It could be any real estate property that you own such as any plot, house, farm, piece of land, building, etc. The recent value set by the government for the purchase of property is 25%.
Because of the high prices of materials like steel, wood, brick taxes have made the cost of construction unbearable for a common person that is why if you want to know about affordable housing societies in Rawalpindi and Islamabad then please do not hesitate to contact Tajarat Properties. We will be pleased to assist you in any real estate matter at any level and to any extent.
For further detailed information on property taxes, please contact us at Tajarat Properties. We have redefined the Art of Performance.
Classification of Property taxes in Pakistan:
In Pakistan, the government has imposed a fixed percentage of taxes for the sale and purchase of the property. Following is the detailed information about taxes on sales and purchase of the property:
Taxes on the Sale of Property:
Capital Gains Tax (CGT):
The Capital Gains Tax is the kind of tax that is applied when a person sells a property. This is paid on the profit acquired as a result of that sale of the property. As per the Finance Act 2017, the Capital Gains Tax is applicable when the property is sold within the 3 years of its purchase.
The percentage of imposed tax is 7.5% if the property is sold by the second year and this percentage will be 5% if the property is sold by the third year of the purchase. If a property is not sold within three years then no Capital Gains Tax will be applicable or in other words, the owner will not be liable to pay this kind of tax on the sale after three years.
Taxes on the Purchase of Property:
When someone wants to buy a piece of property in any territory unit of Pakistan, then these are the kinds of taxes that the buyer must know to carry out the deal in a smooth way without any confusion or miscommunication. Following are a couple of taxes that are to be paid while the procurement of the property:
Capital Value Tax (CVT):
Those who are interested in the purchase of a property would have to pay Capital Vale Tax. This tax is paid while buying a property and this concludes the purchase, otherwise, it will remain dubious. This is payable to the value of the procured property. As per the Finance Act, 2006 a percentage of 2% amount would have to be paid on the asset value.
The kind of property which is given to someone as a gift, as an exchange, or removing the rights of property, these all also comes under the Capital Value Tax. The point to remember here is that the transfer between the parents, wife, or among any of the blood relation persons, via gift or by inheritance would be excluded from this tax.
There has also been a suggestion for the government departments to reduce the Capital Value Tax and Stamp Duty to 1%. These recommendations were not implemented by the provinces so far. This means that the CVT and Stamp Duty still counts to 5% in total, in which 2% is CVT and 3% Stamp Duty. For those who are wondering that what is a Stamp Duty so, Stamp Duty is the tax that is paid on the legally approved document under the 1899 Stamp Act.
In conjunction with the aforementioned property taxes of Stamp Duty and Capital Value Tax, the Withholding Tax (WHT) is also a kind of property tax that has its significance in the contribution to the growth of the economy. Following are the main points to keep in mind concerning WHT:
- People buying houses will have to pay the equal of 2% when they file an income tax and this 2% will be double as a penalty if the person does not file the tax returns.
- Those persons who are willing to buy any kind of property will have to pay the Withholding Tax, but there is a condition applied that this will be applicable if the property has a value of more than Rs. 4 million.
- Those persons selling their property will also have to pay 1% only if they are regular tax filers and this will double to 2% if the person is non-filer.
- Withholding Tax has to be paid at the time of the deal of a real estate property, while the registration of the sales deed.
- Withholding Tax is also known to be a sort of “advance tax”. This means that this applies as a tax that is imposed before others.
Exemption from Taxes:
Some kinds of real estate properties are exempted from paying the taxes. Following are the classification of tax excluded scenarios:
- Housing construction developed on the land area that is less than the 5 Marla.
- The property is exempted from the taxes if it is unable to generate the rent of Rs. 4320/- per annum.
- If the owner himself is living in a single house and it is unable to generate the annual rent of Rs. 6480/-
- A structure that is the property of a widow, young orphan, persons with disabilities with up to Rs. 12, 250/- per year is also exempted.
- A property that measures 1 Kanal and is owned by a retired government servant from a Federal or Provincial job.
- Buildings which are owned by some kind of a local authority such as a corporation, municipality, or town committees.
- Those structures which are part of the public property such as parks, playgrounds, community centers, government schools and colleges, libraries, and hospitals are exempted from taxation.
Approaches to Pay Taxes:
There are usually three approaches that are followed for the tax collection, which are as follows:
Tax Collection Branch:
Provinces have their tax collection departments for tax collection throughout the province. If a person wants to pay their due amount of taxes they may contact these departments and inquire about all the relevant procedures about tax submission, due dates, and documents required.
Tax Collection Through Private Financial Institutions:
We have elaborated another easy and convenient way to submit your taxes is through banks. All you have to do is to contact the relevant officer in the bank and understand the process of forms fulfillment. Then fill the hardcopy or online forms for this purpose. Make sure all the required information and asked documents are duly attested and available.
Online Financial Systems:
For your further convenience, Tajarat properties is pleased to inform you of yet another way more convenient way of paying your due taxes. Through online banking systems, you will have to contact the relevant bank branch office and follow the set easy guidelines to submit taxes.
Property Tax in Pakistan 2020-2021 would be easy to understand if people realize their duty to the country and the land that they call their own. Sadly, a dilemma has emerged in Pakistan that people are hesitating to perform the sacred duty of paying property taxes. This is being carried out by a large part of the population and it has the potential to ultimately hurt the economy of Pakistan.
Plato once said that “When there is an income tax, the just man will pay more and the unjust less on the same amount of income”. This indicates that taxes have been existing in our societies for thousands of years and they have always irked the people, whereas, it should not cause any discomfort if the means of income are upright and the taxes are paid in due time.
We need to comprehend our duties as a responsible citizen and put our best efforts to fulfill them. A responsible citizen always keeps his matter correct and always keeps up his tax returns to fulfill his societal duty and serve society. No matter what kind of property you own, you must pay the property taxes and if you do not take it seriously then you will surely be liable to the penalties and in extreme cases the criminal proceedings as per the financial laws of Pakistan.
To clear any kind of confusion or query, please feel entirely free to contact us on Tajarat Properties and accomplish your real estate property dreams.