ISLAMABAD: The federal government and the real estate agents on Saturday agreed to enhance the average (district controller) DC valuation rate by up to 40 percent in 21 major cities, including Islamabad, Karachi and Lahore.
A few housing societies’ or posh areas’ market rates will increase by 300 percent. Another round of negotiations between the government and real estate agents was held to discuss the issue of valuation of property and related tax matters. Finance Minister Ishaq Dar was representing the government side.
Ishaq Dar told the media after the meeting that the two sides had agreed on some points, like the holding period for capital gain tax (CGT) has been reduced from five years to three years and there will be no CGT on property held for more than three years.
Furthermore, on properties acquired on or after July 1, 2016, 10 percent CGT will be collected for up to one-year holding period. If the holding period is between one and two years, 7.5 percent CGT will be collected. If the holding period is between two and three years, 5 percent CGT will be charged.
It is worth mentioning here that if the holding period was more than three years, those properties will be exempted from CGT.
On the other hand, for properties acquired before July 1, 2016, 5 percent capital gain tax will be imposed if the holding period is less than thee years. If the holding period is more than three years, three will be an exemption, and exempted valuation will apply on the CGT, withholding tax.
Moreover, the valuation tables will be notified by the Federal Board of Revenue (FBR) instead of valuation by the State Bank of Pakistan (SBP)-approved valuers. For areas that have not been included in valuation tables, DC rate will apply.
Another point is that the basic threshold of Rs 3 million for application of withholding tax on purchase of immovable property has been enhanced to Rs 4 million.
While replying to a question, Ishaq Dar said that the government did not give any amnesty to this sector. “We have prepared a mechanism and appropriate legislation will be done to give effect to the proposed changes, as agreed by all stakeholders.”
Published in Daily Times , 31 july 2016.