Budget 2024 Property Tax in Pakistan: A Detailed Guide

Introduction

The new government of Pakistan has announced its first budget for 2024, which includes significant changes to the property tax system. This budget aims to increase government revenue by raising taxes, particularly targeting property transactions. In this blog, we will provide detailed information on the new property tax measures and their implications.

Filer Advance Tax for Buyers and Sellers

The government has maintained the advance income tax rate at 3% for new property buyers and sellers who are filers. This means individuals who file their income tax returns on time will continue to pay the same rate as before. This measure is designed to encourage compliance with tax filing requirements.

Late Filer Advance Tax

The new government has introduced a late filer advance tax concept. Individuals who submit their income tax returns after the due date will now have to pay a 6% advance tax on the FBR value of the property at the time of purchase or sale. This is intended to penalize late filers and encourage timely submission of tax returns.

Non-Filer Advance Tax

Non-filers, or individuals who do not file their income tax returns, will face significantly higher taxes under the new budget. The advance tax rate for non-filer sellers has been increased to 10% of the FBR value, while non-filer buyers will have to pay 12% of the FBR value. These increased rates aim to pressure non-filers into becoming compliant with tax laws.

Impact on Bahria Town Karachi Property

The increase in non-filer tax rates and the introduction of the late filer concept have led to a decline in property prices in Bahria Town Karachi. As a large proportion of property market participants in Pakistan are non-filers, the higher taxes have discouraged transactions, leading to a market downturn. However, for filers, the tax rates remain unchanged, which may provide some stability for those compliant with tax regulations.

FBR TAX RATE LIST 

SELLER TAX 

BUYER TAX 

Market Outlook

Given the new budget, it is anticipated that property prices will either remain stable or drop further over the next two to three years. The increased tax burden on non-filers and late filers is likely to reduce market activity in the short term, but it may also lead to greater compliance and a more transparent market in the long run.

Frequently Asked Questions (FAQs)

What is the current rate for filer advance tax?

The current rate for filer advance tax is 3% for both property buyers and sellers.

How is the late filer advance tax calculated?

The late filer advance tax is calculated at 6% of the FBR value of the property at the time of purchase or sale.

What are the consequences of not filing property tax on time?

Late filers face a higher tax rate of 6% on property transactions and potential legal penalties, including fines and additional taxes.

How can one become a filer to avoid higher taxes?

To become a filer, individuals must register with the Federal Board of Revenue (FBR) and submit their income tax returns within the due date, including all required financial documentation.

What is the impact of increased taxes on property prices in Karachi?

The increased taxes have led to a decline in property prices in Karachi, particularly in areas like Bahria Town, due to higher financial burdens on buyers and sellers.

How does the new budget affect property investors?

Property investors may face higher costs and lower returns in the short term due to the increased taxes. However, increased compliance and transparency may benefit the market in the long term.

Conclusion

The 2024 budget introduced by Pakistan's new government has brought significant changes to the property tax system. With higher taxes for non-filers and penalties for late filers, the government aims to increase compliance and revenue. While these changes may lead to a short-term downturn in the property market, they could result in a more stable and transparent market in the future. Property buyers, sellers, and investors should stay informed and comply with tax regulations to navigate these changes effectively.