The Finance Act of 2024 has eliminated the concept of the holding period for immovable properties acquired on or after July 1, 2024, as detailed in an income tax circular issued by the Federal Board of Revenue (FBR).
Under the revised sub-section (1A) of section 37, gains from the disposal of immovable property in Pakistan will be taxed as capital gains at rates specified in the First Schedule.
Previously, the tax rate on capital gains depended on the holding period, with a maximum rate of 15% for properties held for less than a year. The rate decreased progressively, reaching 0% for plots held for more than six years, constructed properties held for over four years, and flats held for more than two years.
Effective July 1, 2024, gains from property disposals will be taxed at a flat rate of 15% for those listed on the Active Taxpayers List (ATL) at the time of disposal.Â
For individuals and associations of persons (AOPs) not on the ATL, the tax rate will follow Division I of Part I of the First Schedule, while companies not on the ATL will be taxed according to Division II of the same schedule. However, the minimum rate for individuals and AOPs will not fall below 15%.
For properties acquired on or before June 30, 2024, the previous tax regime will remain in effect, meaning gains will still be taxed based on the holding period at rates existing before the implementation of the Finance Act, 2024.
