As a Pakistani resident, you need to be aware of the capital gains tax (CGT) when selling properties or securities. Capital gains refer to the profit you make when you sell an asset for a higher price than what you initially paid for it. This article will discuss the CGT on disposal of immovable properties and securities in Pakistan, along with recent updates and changes.
Capital Gain on Disposal of Immovable Properties
1. Where the gain does not exceed Rs. 5 million – 3.5%
2. Where the gain exceeds Rs. 5 million but does not exceed Rs. 10 million – 7.5%
3. Where the gain exceeds Rs. 10 million but does not exceed Rs. 15 million – 10%
4. Where the gain exceeds Rs. 15 million – 15%”
The entire amount of gain from the disposal of immovable property is now taxable at graduated rates, which are provided in Division VIII of Part I of First Schedule of the Ordinance.
The table below shows the rates of tax for different holding periods:
| Sr. No. | Holding Period | Rate of Tax | ||
| 1 | Open Plots | Constructed Property | Flats | |
| 2 | Where the holding period does not exceed one year | 15% | 15% | 15% |
| 3 | Where the holding period exceeds one year but does not exceed two years | 12.50% | 10% | 7.50% |
| 4 | Where the holding period exceeds two years but does not exceed three years | 10% | 7.50% | 0 |
| 5 | Where the holding period exceeds three years but does not exceed four years | 7.50% | 5% | – |
| 6 | Where the holding period exceeds four years but does not exceed five years | 5% | 0 | – |
| 7 | Where the holding period exceeds five years but does not exceed six years | 2.50% | – | – |
| 8 | Where the holding period exceeds six years | 0% | – | – |
Capital Gain on Disposal of Securities
The Ordinance also provides a separate block of taxation for capital gains on the disposal of securities. Earlier, a flat tax rate of 12.5% was applicable to all gains on the disposal of securities, irrespective of the holding period. However, graduated tax rates have been introduced with respect to securities acquired after 1st July 2022.
The table below shows the new tax rates applicable to securities acquired after 1st July 2022:
| S.No. | Holding Period | Rate of Tax for Tax year 2023 and onwards |
| 1 | Where the holding period does not exceed one year | 15% |
| 2 | Where the holding period exceeds one year but does not exceed two years | 12.50% |
| 3 | Where the holding period exceeds two years but does not exceed three years | 10% |
| 4 | Where the holding period exceeds three years but does not exceed four years | 7.50% |
| 5 | Where the holding period exceeds four years but does not exceed five years | 5% |
| 6 | Where the holding period exceeds five years but does not exceed six years | 2.50% |
| 7 | Where the holding period exceeds six years | 0% |
| 8 | Future commodity contracts entered into by members of Pakistan Mercantile Exchange | 5% |
However, securities acquired on or before 30th June 2022 will continue to be charged to tax at the earlier flat rate of 12.5%, irrespective of the holding period.
Conclusion
In conclusion, it is important to understand the tax implications of disposing of immovable properties and securities in Pakistan. The tax rates vary based on the holding period and type of asset, and recent changes have introduced graduated tax rates for securities acquired after July 1, 2022. By keeping up-to-date with the latest tax laws and regulations, individuals can avoid penalties and ensure compliance with the tax authorities. Consultation with a tax expert or lawyer may be beneficial for those with complex tax situations.
