Property Tax Guide for Beginners

Property Tax Guide

Pakistan is listed in high population countries with almost 200 million individuals. With this much population, the transactions in real estate sector is also increased day by day.  The realty sector in Pakistan contributes more than 2% in overall country’s GDP.

Government’s Tax Policy

As it is usually seen that in order to evade taxes, usually buyer and seller mutually agrees to document less amount of property in agreements or sale deed. You can find 100 of ways to avoid paying property tax. On the other hand, Federal Board of Revenue (FBR) is very competent in keeping record of your income, investments, transaction and paid tax.

Present Government of Pakistan, Pakistan Tehreek-e-Insaaf (PTI), has evoked a new wave of taxes to support the economy. In this regard, Federal Board of Revenue has announced Property Valuation Rate 2 times in a short time span of 1 year. In effect of recent notification issued on July 24, 2019, the overall property valuation rate as per FBR increased up to 30%.

The main aim is to bring market value closer to government assigned value. Ultimately, it will boost up the tax. Also, it will also keep check n balance on tax-avoiders.

For beginners, this could be much confusing. So, this blog will guide you about the Tax paying in light of new Property Valuation Rate.

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Types of Property Taxes

All the citizen and non-citizens are bound to pay certain kind of tax if they own property in Pakistan. In Particular, there are 2 kinds of tax one has to pay i.e.

  1. Federal Tax
  2. Provincial Tax

These taxes are further categorize into several types. Let’s have a look upon each of them separately

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Federal Tax

Federal Tax, as name suggests, is a kind of tax that is given to federal government. It further divided in to two.

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Advance Tax

Advance Tax is applicable under section 147 of Income Tax Ordinance 2001. This tax is payable by buyer only.  Advance Tax comes into effect on registering, recording or attesting transfer of property. The details for this tax is given as follow

  • 1% of total value of property (for Filers)
  • 2% of total value of property (for Non-filers)

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Capital Gain Tax

Capital Gain Tax is applicable on the amount you have gained as a profit by selling your property. It is not calculated by considering whole value of property but just the profit. So, ultimately you are bound to deposit this amount at the time of your annual tax returns. Get More information about Capital Gain Tax here.

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Provincial Tax

These taxes are paid to Province and varies from one to another. The main taxes particularly paid to provincial government is discussed below.

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Capital Value Tax

Capital Value Tax is paid on transactions of properties lie in Urban Area. Purchaser is bound to pay this tax, not Seller. For residential land, it is applicable property exceeds by 1 Kanal. Meanwhile, it is compulsory for commercial property transactions.

Under Finance Act, 2006, Capital Value Tax would be calculated as 2% of recorded value of property. On the other hand, if the property doesn’t have any documented or recorded value then tax will be calculated as Rs.50 for per square yard.

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Registration Fee

Under Registration Act 1908, the buyer of property is bound to give 1%

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Stamp Duty

According to stamp Act 1899 “the buyers and sellers are bound to pay a certain amount to present government in lieu of the stamp paper”. Stamp paper is used in making of legal agreements and contracts in Real Estate sector.

For further information about Stamp duty

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Other Legalities

Apart from these basic taxes kinds, keep in mind other legalities including

  • If you bought property on installments, you are not bound to pay any tax until and unless it’s transferred to your name after full payment.
  • If you received a property as a gift from blood relatives, tax will be calculated only upon 20% of property valuation, not on whole

In other scenario, you’ll pay whole tax if they aren’t your blood relative.



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