KARACHI: The Finance Bill 2019 has proposed the revamp the capital gains tax (CGT) regime on disposal of immovable property, whereby incidence of tax on gains arising from real estate trading is increased.[the_ad id=”31605″]As against the current uniform basis of taxation of all types of immovable properties, the Finance Bill 2019 proposes to introduce the following:
a) Gains arising on disposal of open plots as well as constructed properties are proposed to be taxed at normal rates where the holding period is upto 1 year.
b) For open plots: – if the holding period exceeds 1 year but does not exceed 10 years, the gain chargeable to tax will be reduced by 25% and taxed at normal rate; and – if the holding period exceeds 10 years, gain will be taken as zero.
c) For constructed properties: – if the holding period exceeds 1 year and does not exceed 5 years, the gain chargeable to tax will be reduced by 25% and taxed at normal rate; and – if the holding period exceeds 5 years, gain will be taken as zero.
In the salient features issued with the budget documents, it has been mentioned that the gain on disposal of open plots would be reduced on the basis of net present value; however, no specific provision in respect thereto is available in the Finance Bill.
The Finance Bill 2019 also proposes a flat advance tax at the rate of 1% of the fair market of immovable property to be collected at the time of registering, recording or attesting its transfer, as against the existing rates which range from 0% to 2% based on the value of immovable property.