The Federal Board of Revenue has announced the elimination of the holding period concept for immovable properties acquired on or after July 1, 2024, as part of the Finance Act 2024.
Properties purchased on or after this date will be subject to a capital gains tax of 15% for filers, with a higher rate for non-filers. However, the FBR clarified that properties acquired before July 1 will continue to follow the old taxation formula.
According to an income tax circular issued by the FBR, gains from the disposal of immovable property in Pakistan will now be taxed under the capital gains category, at rates specified in the First Schedule.
Before the Finance Act 2024, capital gains tax was based on the holding period, with a maximum rate of 15% for properties held for less than a year, including open plots, constructed properties, and flats.
The tax rate decreased as the holding period increased, reaching 0% for plots held for more than six years, constructed properties held for more than four years, and flats held for more than two years.
With the introduction of the Finance Act 2024, the holding period concept has been removed for properties acquired on or after July 1. The gains from these properties will now be taxed at a flat rate of 15% for individuals listed on the Active Taxpayers List (ATL) at the time of disposal. This change is expected to significantly impact the real estate market by removing the previous incentives for long-term property investments.
