Three key tax measures introduced for real estate

ISLAMABAD: The FBR has introduced progressive taxation rates on the sale and purchase of properties under the withholding tax regime and divided them into three categories. The FBR has come up with the concept of late filers and enhanced their rates if the taxpayers preferred to come into the tax net with late filing. The FBR also introduced fair market value slabs and stated where the fair market value does not exceed Rs50 million, there will be tax of 12 percent. Where the fair market value does not exceed Rs50 million, there will be tax of 16 percent. Where the fair market value exceeds Rs100 million, there will be tax rate of 20 percent.

The progressive tax rates on purchases and sales of properties are categorized into three categories, namely, one as filers, two as late-filers and three as non-filers.

Meanwhile, the FBR also slapped Federal Excise Duty (FED) on commercial properties and first sale of residential properties at the rate of 5%.

On purchase of property by filers, the rates of tax would be 3 percent for values of properties up to Rs50 million, 3.5 percent for values of properties between Rs50 million and Rs100 million, and 4 percent for value of properties above Rs100 million. Late-filers would face higher rates: 6 percent, 7 percent, and 8 percent respectively for the same property value brackets. The non-filers would experience higher rates, set at 12 percent for properties up to Rs50 million, 16 percent for Rs50-100 million, and 20 for properties exceeding Rs100 million. The proposed progressive advance tax rates at source for filers on sale of immovable property are 3 percent for properties valued up to Rs50 million. For properties valued between Rs50 million and Rs100 million, the withholding tax rate is 4 percent, and for properties valued above Rs100 million, the rate is 5 percent.

For non-filers, the rate is 10 percent for properties of any value. Further, for late filers, the rate of tax will be 6 percent, 7 percent and 8 percent respectively depending on the value of property. A flat 15 percent rate of tax on gains from the disposal of immovable property acquired on or after 1st July, 2024 by filers regardless of the holding period is proposed, and for non-filers, progressive tax rates based on the prescribed slab rates in Division I of Part I of the First Schedule, with a minimum tax rate of 15% is proposed.

At present, capital gains on sale of securities is taxed on the basis of holding period with maximum rate at 15 percent and no tax if the holding period exceeds 06 years. Now, for the securities acquired on or after 01 July, 2024, the capital gain on sale of such securities will be taxed at flat rate of 15 percent for filers, and for non-filers, the gain will be taxed at normal rates with minimum rate of 15 percent and maximum rate of 45 percent. Further capital gains income from mutual funds and collective investment schemes is also enhanced from 10 percent to 15 percent.