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Types of Property Taxes and their Definition.

October 8, 2018

Along with income tax and sales tax, there are a number of taxes that one ends up paying as a citizen of Pakistan. However, the most confusing by far has to be the host of property-related taxes which can be overwhelming and confusing for any new entrant to the property market. Following is your guide to the kinds of property taxes and when they are applicable in Pakistan.


The Different Kinds of Taxes

Following are the most important taxes that are applicable on property in Pakistan:

  1. Property Tax
  2. Capital Value Tax
  3. Stamp Duty
  4. Withholding Tax (or Advance Tax)
  5. Capital Gains Tax


Property Tax

Property tax is a provincial tax levied on the annual rental value of the property, based on Urban Immovable Property Tax Acts of the respective provinces. The tax rates differ between provinces. However, it is either a flat rate, or a percentage of the annual rental value. Depending on the provinces, the rate of taxation can differ depending on whether the property is rented or self-occupied.


Capital Value Tax (CVT)

The Capital Value Tax (CVT) is another provincial tax and is paid by the buyer at the time of acquisition of property. As the name suggests, it is payable on the capital value of an acquired asset. It is paid when the said asset – in this case, immovable property – is acquired.

If it is a case of inheritance or a gift from spouse, parents, grandparents or siblings, CVT will not be levied. In cases where it is a gift or exchange, or where property value is not mentioned in the transaction, the value of the property is going to be calculated according to DC Rates.

It must be noted that while previously the CVT was levied only in urban areas, according to a news report, it will now also be levied on rural areas that have been developed as well.


Stamp Duty

Stamp Duty is another tax that is levied by the provincial government and is paid by the buyer at the time of acquisition of property. It is basically a tax required on most legal documents under the Stamp Act 1899. Stamp duty is levied at 3% of the DC rates of the property.



Withholding Tax (WHT)

According to a notice issued by the FBR, Withholding Tax (WHT) is a federal tax payable by both buyers and sellers if the value of property is great than PKR 4 million. WHT is paid by the seller only in case he is selling the property within three years of buying it.

It basically acts as an advance on other taxes and, hence, is also adjustable into the tax liabilities of the buyer and against the CGT of the seller. It has to be paid at the time of registration of the sales deed. Following are the rates of WHT:


By Buyers

For non-filers, 4% of the FBR rates.

For filers, 2% of the FBR rates.


By Sellers

For filers, 1% of the FBR rates and none if sold within five years of purchase.

For non-filers, 2% of the FBR rates.


Capital Gains Tax (CGT)

The Capital Gains Tax (CGT) is a federal tax payable by the seller. When the seller makes profits on selling property (capital asset), it is the profit (capital gain) which is taxed, hence the name. According to the Finance Act 2017, CGT is levied only when the property is sold within three years of its purchase. The rate of taxation is 10% for the first year, 7.5% if sold during second year and 5% if sold during the third year. These gains are to be calculated according to the fair market value, based on FBR’s valuation table. Any property held for more than three years will not make the seller liable for payment of CGT.

These are some of the most common taxes that are applied to the property in Pakistan. If you have any question about these, ask away in the comments.

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House Buying 101: 5 step financial strategy to get your own house.

July 24, 2018


Buying or renting a property comes at a great cost. It is best advised to have a financial strategy in place and to formulate a financial strategy, you need to ask a few pertinent questions. Read on below to find out what those questions area and how you can formulate your own 5 step strategy to ensure that your financials are not in a mess.

According to experts, whenever you buy your house, you need to consider the following questions:

  1. How long do I intend to live in this place?
  2. Where do I see myself in the next 10-15 years?
  3. Do I have to make house improvements?
  4. Do I want to make another investment or keep cash in hand?
  5. Can I take a financial risk?
  6. Do I want to be debt free?

Once you have answered these questions, they will give you a good idea as to how you want to go about developing your financial strategy. It is highly advised that you do a bit of research before continuing from this point. Figure out what options are available in the market that best fit your objectives.

Once the research is done, you can formulate the strategy that fits your requirements. A general checklist or method to formulate a strategy would be as follows.

Pay the debts

The first step is to clean your plate. In other words, the idea is to pay of any existing debts or credit cards that you have. This is so that your income isn’t stretched too thin and you can manage the payments easily.

Create a spending plan

Often times we tend to go above the budget we have planned. In order to avoid this situation, you can create a spending plan. Sit down and separate your needs and wants. If you still have debts, then you must put a stop to your wants. This way you end up stopping your impulse spending.

Identify sources

The next step is to identify your potential sources of finance. This could be your savings or this could be a loan. Either way, these need to be finalized before you jump into this. Most people look at their savings, provident fund, 401K and so on.

Budgeting is the way

The next step is to regularize your spending. The best way to go about it is to follow the 50-30-20 rule for budgeting. Simply put, 50% of your budget should go to living essentials, 30% should cater to your personal spending and 20% should be your savings. This way you can prioritize your spending and savings, resulting in little to no financial strain later in life.

Prepare for the big haul

Next up is to align everything that you need. This means that you need to find an agent, get out there and research the market, shortlist the properties you are interested in and make the final offer. To be able to do that, your paperwork needs to be in place too. This is crucial because preparing the right documentation takes a decent chunk of your time. It is better to be thorough with such things rather than regret at the eleventh hour.

So, these were some of the ways in which you could go about building your own financial strategy. Would you consider these factors when making up your own strategy? What are some of the other factors that you include in your list? Talk to us in the comments section below.

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