You call yourself a true citizen? Let’s evaluate it a little bit seriously today!
What part your individual self plays
in economic, social and political domains of your country?
Very little?
Now add all these “very little” and you get the importance right there!
Give this blog a read and you will know exactly what has been missing from your ‘responsible citizenship personal diary’ with special reference to the real estate tax in Pakistan.
Property Tax
Property tax is a certain amount of money that is payable to the government by every land owner. It also includes sales tax that has to be paid while purchasing the property while maintenance is paid every year. Before getting into the details of all the official tax notices and property exemption we need to clarify which types of taxes exists in Pakistan for Tax payers.
Types of Taxes
For all those seeking to own a house, buy a house or transfer it may also look for the useful legal information has been introduced and is carry forward in the year 2020 property tax trends. There are four types of taxes:
- Capital Value Tax (CVT)
As the name refers, it is payable on the Capital Value of the asset you intend to acquire permanently. CVT is payable when you purchase a land. According to the Finance act of 2006, the amount applicable on the property as CVT is calculated at the rate of 2% of the total value of the property. However, the new budget proposed by the new tenure has resulted in abolition of DC rates. There will be 3% of the stamp duty payable for the legal documents under the stamp act 1899 property alongside 2% of the CVT which now makes it 5% on an urban property.
Now you
must be wondering what type of property is eligible for CVT?
Property that is exchanged as a gift or as a part of intentionally transferring
the rights is covered under the CVT.
- Capital Gains Tax (CGT)
Risk avoider? File CGT right away!
CGT is a type of tax that has to be paid by the seller at his intention of selling his property. This tax defines the legal percentage referred from the profit earned on the sale of property. CGT is applicable on the property if it’s being sold within the first three year of purchase (Pakistan Finance Act, 2017). Moreover, the tax percentage may vary depending upon in which year the owner is selling the property after purchase i.e., 10% during first year, 7.5% in the second year and 5% in the third year.
- Withholding Tax
Then comes the mix and match of CGT & CVT. Withholding tax is the amount that is paid by both buyer and seller when its sold. WHT is applicable only on the property whose worth is more than PKR 4 million.
Moreover:
- If a buyer is a filer of income tax, he/she has to pay 2% of WHT, if he is a non-filer than the tax applicable is 4%.
- If a seller is a tax-filer than the applicable tax is 1%, if he is a non-filer than the tax percentage is 25% in that case.
- Withholding tax is to be paid at the time of deal while registering the sales deed.
- WHT is also referred as ‘advance tax’ and can be adjusted into the tax liabilities of a homebuyer or against the CGT of the seller.
How to Pay your Property Tax in Pakistan
Till this point you might be wondering why have you been so careless about the nitty-gritty of the most relevant aspects of your assets in Pakistan!
There are three ways to pay your taxes. First, you need to identify the fact that every individual province has its own tax collection department and you need to get in contact with your respective city-wise department and pay your taxes. Second, Tax can be paid through online bank challan system and third, you can generate online property tax challan for payment within your time with convenience.
Property Tax Exemption
For all the home owners or owners-to-be must find the information useful in order to follow legalities more concerning with the applicable & non-applicable property tax in Pakistan.
Your property gets exemption from tax if:
- The constructed land area of residential property is less than 5 Marla other than the locality of category A.
- Property uncapable of commanding annual rent more than PKR 4,320.
- Residential property commanding annual rent more than PKR 6,480 is exempted form the tax only if the owner is residing in it.
- Property owned by an orphan o disabled & is worthy up to PKR 12,150 per annum.
- Property with government ownership.
- Religious buildings (e.g., Mosques etc.).
- Property being used publicly for e.g., public parks, schools, libraries etc.
- Properties generating profit for religious or welfare purpose.
Tax Notices
Government issues total four types of notices i.e., P.T – 10, P.T – 11, P.T – 14 & P.T – 13.
P.T – 10:
This notice contains information regarding name, property number, tax amount for current financial year along with the last date of payment is mentioned. You can submit your property tax in any branch of National Bank of Pakistan or State Bank of Pakistan along with the filled challan. The challan consists of three portions. The duplicate portion of the challan is sent to the E&T department through treasury. On the other hand, the photocopied receipt can be sent directly to the E&T department for more prompt procedure so any further notice can be sent to the assessee in no time.
P.T – 11:
This comes when the tax payer has not paid the tax within the mentioned deadline according to the P.T -10 requirements and penalty is imposed almost equal in amount to the actual payable tax. The assessee is given opportunity to explain his non-disposition by appearing before the concerned authority or present any representative.
P.T – 14:
In case the property owner fails to deposit tax in time, tenant of that property is than asked to submit the rent in the Government Treasury until the liability remains open. Referring to such a case tenants receive direct notice from the government for direct rent deposition on Challan P.T – 10.
P.T – 13:
Upon receiving information regarding any change in the property description, use, ownership or possession, the concerning authority ETO/AETO issues P.T – 13 stating such change. Person who is issued such a challan should get into this matter seriously and report within 14 days of the issuance referring to file an objection in office of the concerned ETO. If no objection is received within the time frame than the change is considered as confirmation.
Let’s not forget what difference it makes by a single responsible devotion!
Pay Your Taxes in 2020 and make a difference we criticize about.
