Capital Gains Tax on Property in Pakistan – Complete Guide

Capital Gains Tax (CGT) on property is an important tax consideration when a person sells or otherwise disposes of immovable property in Pakistan for a gain.

Many people assume that buying a property for one amount and selling it for a higher amount automatically means the entire sale price is taxable. This is not generally how capital gains tax works. The tax is related to the gain arising from disposal of the property, subject to the applicable provisions of the Income Tax Ordinance, valuation rules, acquisition date, taxpayer status and other relevant conditions.

The Federal Board of Revenue (FBR) administers the federal income-tax framework governing capital gains on immovable property. Section 37 of the Income Tax Ordinance, 2001 provides the basic framework, while the applicable rates are specified in Division VIII of Part I of the First Schedule.

Because property tax rules can change through Finance Acts and amendments, taxpayers should always verify the current law before completing a property sale.

What Is Capital Gains Tax on Property?

Capital Gains Tax is income tax charged on a taxable gain arising from the disposal of a capital asset.

For property transactions, the basic concept can be understood as the difference between the relevant consideration received on disposal and the cost of the asset, subject to the rules of the Income Tax Ordinance.

Section 37 provides the general computation formula as:

Capital Gain = Consideration Received – Cost of Asset

The law also contains valuation provisions that can affect the amount treated as consideration or value for income-tax purposes.

For example, if a property was acquired for Rs. 8 million and later sold for Rs. 12 million, the basic difference is Rs. 4 million. The actual taxable gain, however, must be determined under the applicable tax law and valuation rules rather than simply assuming that every transaction can be calculated from these two figures without further examination.

Which Law Applies to Capital Gains Tax on Property?

Capital gains on immovable property situated in Pakistan are dealt with under the Income Tax Ordinance, 2001.

Section 37(1A) provides that gain arising from disposal of immovable property situated in Pakistan is chargeable under the head Capital Gains at the rates specified in Division VIII of Part I of the First Schedule.

The tax treatment has changed over the years. One of the most important recent changes was introduced through Finance Act 2024, which changed the treatment of property acquired on or after July 1, 2024.

Important Change From July 1, 2024

The acquisition date is now extremely important when determining the applicable capital gains tax treatment.

FBR's explanatory circular states that before Finance Act 2024, capital gains on immovable property were generally taxed according to the holding period. The rate could reduce over time, with the previous regime providing zero tax after specified holding periods for different categories of property.

Finance Act 2024 removed the holding-period concept for properties acquired on or after July 1, 2024. For persons appearing on the Active Taxpayers' List on the disposal date, the gain on such property is subject to a flat 15% rate. For individuals and associations of persons not appearing on the ATL, the applicable general rates apply subject to the statutory minimum of 15% of the gain.

This means the date on which the property was acquired should be checked before calculating CGT.

Capital Gains Tax on Property Acquired On or After July 1, 2024

For property acquired on or after July 1, 2024, the previous holding-period relief does not generally apply.

For a person appearing on the Active Taxpayers' List on the date of disposal, the applicable rate on the capital gain is 15%.

For an individual or association of persons not appearing on the ATL, the applicable rates under the relevant income-tax schedule apply, but the law provides that the rate cannot be less than 15% of the gain.

This is a major distinction from the older property regime because simply holding a property for several years does not automatically reduce the CGT rate for property acquired under the post-June 30, 2024 regime.

Capital Gains Tax on Property Acquired Before July 1, 2024

Property acquired on or before June 30, 2024 remains subject to the applicable previous holding-period structure.

For older properties, the rate can depend on:

• Type of property

• Holding period

• Date of acquisition

• Date of disposal

The historical rates under the applicable schedule differ for open plots, constructed property and flats.

For example, the rates for an open plot under the older regime can move down from 15% for a holding period not exceeding one year to lower rates as the holding period increases, ultimately reaching zero after the prescribed period. Constructed property and flats have their own holding-period treatment.

Therefore, a person selling an old property should not automatically apply the 15% post-July-1-2024 rule.

Old Property CGT Rate Structure

For property acquired on or before June 30, 2024, the applicable schedule distinguishes between different categories.

The commonly relevant structure is:

Open Plot:

• Up to 1 year: 15%

• More than 1 year up to 2 years: 12.5%

• More than 2 years up to 3 years: 10%

• More than 3 years up to 4 years: 7.5%

• More than 4 years up to 5 years: 5%

• More than 5 years up to 6 years: 2.5%

• More than 6 years: 0%

Constructed Property:

• Up to 1 year: 15%

• More than 1 year up to 2 years: 10%

• More than 2 years up to 3 years: 7.5%

• More than 3 years up to 4 years: 5%

• More than 4 years: 0%

Flats:

• Up to 1 year: 15%

• More than 1 year up to 2 years: 7.5%

• More than 2 years: 0%

These rates relate to the older property regime and should not be applied automatically to property acquired on or after July 1, 2024.

How to Calculate Capital Gain

The basic calculation begins with identifying:

1. Acquisition cost

2. Disposal consideration

3. Applicable valuation rules

4. Acquisition date

5. Disposal date

6. Property type

7. Taxpayer status

8. Applicable CGT rate

The basic statutory formula under section 37 is based on consideration received less the cost of the asset.

Example

Suppose:

Purchase cost = Rs. 10,000,000

Sale consideration = Rs. 15,000,000

Basic gain = Rs. 5,000,000

If the property was acquired on or after July 1, 2024 and the seller is an ATL individual subject to the 15% CGT rate, a simplified illustration would be:

Rs. 5,000,000 × 15% = Rs. 750,000

This is an illustrative calculation only. The actual liability should be determined from the current law, applicable valuation, documented cost and the taxpayer's circumstances.

Why Property Valuation Matters

Property valuation is important because the Income Tax Ordinance contains fair-market-value provisions for immovable property.

FBR can determine fair market values for specified areas through notifications. Where an FBR valuation is not available for an area, the law provides for the relevant value determined by the District Officer (Revenue) or another authorized authority for stamp-duty purposes. The law also provides that certain property values used for income-tax purposes cannot be below the applicable fair-market value.

FBR maintains official valuation tables for numerous cities across Pakistan, including Lahore, Karachi, Islamabad, Faisalabad, Multan, Jhang, Bahawalpur, Sialkot and many others.

Therefore, taxpayers should check the applicable valuation instead of relying only on an informal market estimate.

FBR Valuation and Sale Price

The amount written in a sale agreement should not automatically be assumed to be the only figure relevant for every federal tax purpose.

FBR's valuation framework can establish a fair market value for immovable property. The Income Tax Ordinance also provides that the relevant consideration/value for specified provisions should not be lower than the prescribed fair market value.

This is one reason why property taxpayers should retain complete purchase and sale documentation.

Is Capital Gains Tax the Same as 236C?

No.

Capital Gains Tax under section 37 and advance income tax collected under section 236C are separate provisions.

Section 236C concerns advance tax collected from the seller at the time of sale or transfer of immovable property. FBR's current information shows that rates under section 236C vary according to the gross consideration and taxpayer filing status.

This means a seller can encounter both:

• Capital Gains Tax on the taxable gain

• Advance tax collected at the time of sale under section 236C

The two should not be treated as the same tax.

Current Section 236C Rates

FBR's current FAQ, reflecting amendments made through Finance Act 2025, lists section 236C seller-side advance tax rates based on gross consideration.

For a filer:

• Up to Rs. 50 million: 4.5%

• More than Rs. 50 million up to Rs. 100 million: 5%

• More than Rs. 100 million: 5.5%

For a late filer:

• Up to Rs. 50 million: 7.5%

• More than Rs. 50 million up to Rs. 100 million: 8.5%

• More than Rs. 100 million: 9.5%

For a non-filer:

• Up to Rs. 50 million: 11.5%

• More than Rs. 50 million up to Rs. 100 million: 11.5%

• More than Rs. 100 million: 11.5%

These are section 236C advance-tax rates and are not the same thing as the final capital gains tax rate under section 37.

Because withholding rates can be amended through later Finance Acts, the current FBR rate card should be checked when the transaction is actually taking place. FBR currently provides a Tax Year 2027 withholding-tax rate card updated according to Finance Act 2026.

Difference Between CGT and Advance Tax

The distinction can be explained simply.

Capital Gains Tax:

• Applies to taxable gain

• Falls under section 37

• Depends on the applicable CGT regime

• Is connected with the actual capital gain

Section 236C Advance Tax:

• Is collected from the seller at the time of sale or transfer

• Is based on the applicable gross consideration thresholds and taxpayer status

• Is a separate advance-tax mechanism

A person should therefore avoid adding the two rates together and calling the result the “property CGT rate.”

Is Capital Gains Tax Based on Profit?

Generally, capital gains taxation concerns the gain rather than simply the entire sale amount.

If the relevant acquisition cost is Rs. 10 million and the relevant disposal consideration is Rs. 14 million, the basic difference is Rs. 4 million.

However, taxpayers should not calculate final liability solely from a simple profit formula without checking the applicable valuation provisions, transaction records, property acquisition date and other requirements.

What Is Considered the Cost of Property?

The cost of an asset is an important component in calculating capital gain.

The taxpayer should maintain reliable evidence supporting the acquisition of the property and the amount paid.

Depending on the transaction and applicable rules, supporting documentation may include:

• Registered sale deed

• Purchase agreement

• Allotment letter

• Transfer letter

• Payment receipts

• Bank records

• Registration documents

• Property development records

• Other legally acceptable evidence

The exact treatment of a particular expenditure should be confirmed under the applicable tax rules.

Capital Gains Tax on House

A house is immovable property.

The applicable CGT treatment depends significantly on when the property was acquired.

For a house acquired on or after July 1, 2024, the holding-period concept does not provide the old reduction in CGT for an ATL seller. The applicable gain is generally subject to the post-2024 regime.

For a house acquired before July 1, 2024, the older holding-period structure can apply.

Capital Gains Tax on Plot

Plots are also covered by the immovable-property capital gains framework.

For older plots acquired before July 1, 2024, the holding period is relevant under the older schedule.

For plots acquired on or after July 1, 2024, the post-2024 regime applies and the previous long-term holding-period exemption does not generally apply to an ATL seller.

Capital Gains Tax on Flat

Flats have historically had a different holding-period structure under the older regime.

For flats acquired before July 1, 2024, the previous schedule provided lower rates based on holding period and reached zero after the prescribed period.

For flats acquired on or after July 1, 2024, the post-2024 rules apply instead.

Capital Gains Tax for Filer

A taxpayer's Active Taxpayers' List status can be important.

For property acquired on or after July 1, 2024, the law provides a 15% CGT rate for persons appearing on the ATL on the date of disposal.

The taxpayer should therefore verify ATL status when preparing a property transaction.

It is also important to distinguish the CGT rule from section 236C, because section 236C has its own filer, late-filer and non-filer rates.

Capital Gains Tax for Non-Filer

The tax treatment of a person not appearing on the ATL can be different.

For property acquired on or after July 1, 2024, individuals and associations of persons not appearing on the ATL are subject to the applicable normal rates under the relevant income-tax schedule, with the law providing a minimum rate of 15% of the gain.

The taxpayer's exact status and applicable tax rate should therefore be checked rather than assuming that every non-filer simply pays a single fixed CGT percentage.

Overseas Pakistanis and Property CGT

Overseas Pakistanis should distinguish between CGT under section 37 and advance tax under sections 236C and 236K.

FBR states that certain overseas Pakistanis holding POC or NICOP and meeting the non-resident condition can obtain filer rates for advance income tax under sections 236C and 236K even if they have not filed a return, subject to the prescribed procedure.

This special treatment concerns the advance-tax provisions and should not automatically be interpreted as changing every rule relating to capital gains.

Inherited Property

Inheritance can require special consideration.

The 2026 legislative changes include a specific provision concerning the cost of immovable property acquired through inheritance. Finance Act 2026 provides that where an individual acquires immovable property through inheritance, the cost in that person's hands is the fair market value determined under the relevant provision on the date of the original owner's death.

The same 2026 amendments also clarify the treatment of transmission of immovable property to a beneficiary following death, including certain family settlements among family members consequent upon death.

Because inheritance cases can involve succession, transmission, family settlement and subsequent sale, taxpayers should examine the exact legal facts before calculating CGT.

What Happens When an Heir Later Sells Inherited Property?

The inheritance itself and a later sale should not automatically be treated as the same transaction.

Finance Act 2026 introduced a specific rule for determining the cost of inherited immovable property. If an heir subsequently disposes of the property, the applicable CGT calculation should be made using the relevant statutory rules and the prescribed cost basis.

Inheritance cases can therefore require documentation relating to:

• Original owner's death

• Ownership record

• Succession documentation

• Transmission

• Fair market value

• Subsequent sale

• Sale consideration

Professional tax advice can be useful in complicated inheritance cases.

Can Capital Loss Reduce Tax?

The Income Tax Ordinance contains rules dealing with losses under the head Capital Gains.

Section 38 provides a general mechanism for deduction of a loss on disposal of a capital asset in computing the amount chargeable under the head Capital Gains, subject to the conditions and limitations of the law.

A taxpayer should therefore not assume that every property loss can automatically be adjusted against every type of income.

The relevant tax provisions should be examined for the particular transaction.

Does Property Registration Tax Equal Capital Gains Tax?

No.

Property transactions can involve several different taxes and government charges.

Depending on the transaction and jurisdiction, these can include:

• Capital Gains Tax

• Section 236C advance tax

• Stamp Duty

• Registration Fee

• CVT where applicable

• Mutation charges

• Local government charges

• Housing-society or development authority charges

These charges have different legal bases and should be calculated separately.

How to Reduce Errors in CGT Calculation

The safest way to avoid mistakes is to keep complete records from the time property is purchased.

Keep:

• Original purchase deed

• Transfer documents

• Allotment documents

• Payment receipts

• Bank payment evidence

• Property valuation records

• Improvement or construction records where relevant

• Sale agreement

• Sale deed

• Tax payment evidence

• Section 236C payment evidence

• Income-tax return records

Complete documentation makes it easier to establish the acquisition history and calculate the applicable tax.

Common Mistakes to Avoid

Mistake 1: Applying 15% to every property

The 15% rule for property acquired on or after July 1, 2024 should not automatically be applied to every property in Pakistan.

Older properties can remain subject to the previous holding-period schedule.

Mistake 2: Treating 236C as CGT

Section 236C is an advance-tax provision and should not simply be called capital gains tax.

Mistake 3: Ignoring acquisition date

The acquisition date is one of the most important facts after the Finance Act 2024 changes.

Mistake 4: Ignoring FBR valuation

Fair-market-value provisions can affect the relevant property value for tax purposes.

Mistake 5: Using outdated tax rates

Property tax rules can change through Finance Acts.

Mistake 6: Assuming long holding means zero tax

For property acquired on or after July 1, 2024, the previous holding-period relief does not generally apply in the same way.

Mistake 7: Relying only on a property dealer

A dealer's estimate is not a substitute for the applicable tax law or official FBR calculation.

How to Check Current FBR Property Valuation

FBR maintains an official valuation section containing property valuation information for many Pakistani cities.

The current FBR property valuation resource includes cities such as Lahore, Karachi, Islamabad, Faisalabad, Multan, Jhang, Bahawalpur, Sialkot and many others.

FBR also continues to issue and amend valuation SROs. For example, FBR lists 2026 valuation notifications for cities including Islamabad and Sialkot.

Therefore, taxpayers should check the latest applicable valuation notification rather than relying on an old valuation table.

When Is Capital Gains Tax Reported?

Capital gains form part of the taxpayer's income-tax reporting obligations according to the applicable tax year and circumstances.

A property seller should maintain records of the disposal transaction and the tax paid or collected at the time of transfer.

The exact return treatment depends on the taxpayer's status, type of property, transaction and applicable tax provisions.

Is a Tax Adviser Necessary?

A straightforward property transaction may be understandable from the statutory rules, but professional advice can be useful where:

• Property was inherited

• Property was received through a family settlement

• Property was acquired many years ago

• Multiple owners are involved

• Property was constructed or improved

• Property was transferred several times

• The seller is a company

• The seller is a non-resident

• Property is held through a business

• The declared consideration differs from government valuation

• A large capital gain is involved

• A tax dispute exists

A qualified tax practitioner can examine the documents and determine the treatment applicable to the specific case.

Final Checklist Before Selling Property

Before selling a property, check:

1. Exact acquisition date

2. Acquisition cost

3. Property type

4. Ownership documents

5. Current FBR valuation

6. Applicable CGT regime

7. ATL status

8. Expected capital gain

9. Section 236C advance tax

10. Other provincial or local charges

11. Existing tax records

12. Evidence of payments

13. Sale documentation

14. Income-tax return requirements

Final Conclusion

Capital Gains Tax on property in Pakistan depends on the nature of the property, acquisition date, disposal, applicable valuation rules and taxpayer status.

The most important distinction for current property transactions is between property acquired on or before June 30, 2024 and property acquired on or after July 1, 2024.

For property acquired on or after July 1, 2024, Finance Act 2024 removed the previous holding-period concept. For ATL persons, the applicable CGT rate on the gain is 15%, while different rules apply to persons not appearing on the ATL.

For older properties, the previous holding-period schedule remains relevant.

Capital Gains Tax should also be kept separate from advance tax under section 236C, which is collected from the seller at the time of transfer. FBR's current property-tax resources and valuation tables should be checked before completing a transaction because tax rates, valuations and procedures can be amended through Finance Acts and notifications.

For the most accurate calculation, use the current law and official FBR information applicable on the date of disposal and retain complete documentation supporting the property's acquisition and sale.

Guide Information

Step-by-Step Process

1. Identify the property being sold.

2. Confirm the property's legal ownership.

3. Identify the date on which the property was acquired.

4. Determine whether the property was acquired on or before June 30, 2024.

5. Determine whether the property was acquired on or after July 1, 2024.

6. Identify whether the property is a plot, constructed property, house, flat or another form of immovable property.

7. Locate the original purchase documents.

8. Confirm the original acquisition cost.

9. Collect payment evidence for the acquisition.

10. Check the current ownership record.

11. Determine the expected sale consideration.

12. Check the applicable FBR valuation.

13. Check whether a relevant valuation notification applies.

14. Compare the transaction information with applicable valuation rules.

15. Calculate the basic difference between disposal consideration and cost.

16. Determine the applicable Capital Gains Tax regime.

17. Check the seller's ATL status.

18. Determine the applicable CGT rate.

19. Check whether the older holding-period regime applies.

20. Calculate the estimated capital gain.

21. Calculate the estimated Capital Gains Tax.

22. Determine the section 236C advance tax applicable to the seller.

23. Check the current FBR withholding-tax rate.

24. Check whether provincial property taxes apply.

25. Check Stamp Duty requirements.

26. Check registration charges.

27. Check CVT where applicable.

28. Check mutation charges where applicable.

29. Check local government charges.

30. Check whether the property was inherited.

31. If inherited, collect succession and inheritance documentation.

32. Determine the applicable cost basis for inherited property.

33. Check whether a family settlement is involved.

34. Obtain professional tax advice for complicated transactions where necessary.

35. Prepare the sale documentation.

36. Confirm the purchaser and seller information.

37. Ensure the property details are accurate.

38. Arrange the required tax payments.

39. Pay applicable advance tax through the prescribed mechanism.

40. Keep the tax payment evidence.

41. Complete the property transfer or registration procedure.

42. Record the final sale consideration.

43. Maintain all transaction records.

44. Report the transaction in the relevant income-tax return where required.

45. Retain the documents for future tax verification or audit.