Capital gains tax not applicable on sale of land from armed forces, according to Dar – Business


ISLAMABAD: Federal Finance Minister Ishaq Dar said on Sunday that capital gains tax (CGT) will not be applicable on the sale of land donated to armed forces personnel.

“The CGT will not be applicable on the sale of plots handed over to personnel of the armed forces,” said the Minister of Finance at a press conference.

The federal finance minister also said the CGT would not apply to the first sale of land donated to dependents of servicemen killed in the line of duty.

“When land is first sold by dependents of the martyrs, CGT will not apply,” Dar added.

Previously, the CGT was billed according to the property assessment table notified by the district collectors (CD). Property rates in the official valuation table are typically 40 to 60 pc below the actual market price.

Earlier, Dar also announced that in the future, property valuation tables will be notified by the Federal Board of Revenue (FBR).

The RBF will now determine the prices of goods and all transactions will be done through a transparent process.

The real estate CGT is raised to 7 per cent for one to two years and to 5% for two to three years of detention.

Strengths of the CGT

  • A rating has been agreed for large cities

  • The evaluation tables will be notified by FBR instead of the evaluation by the approved SBP evaluators

  • Until that moment and for areas for which no valuation table is notified, the DC rate will apply

  • The CGT holding period has been reduced from 5 to 3 years

  • There will be no CGT on goods held for more than 3 years. Properties acquired from July 1, 2016:

    • If holding period up to 1 year – CGT 10%
    • If the holding period is between 1 and 2 years – CGT 7.5%
    • If the holding period is between 2 and 3 years – CGT 5%
    • If the holding period exceeds 3 years – CGT 0% / exempt
  • Goods acquired before July 1, 2016:

    • If the holding period is less than 3 years – CGT 5%
    • If holding period greater than 3 years – CGT 0% / exempt
  • The valuation will apply to (i) CGT (ii) withholding taxes (iii) for the purposes of section 111.

  • Basic threshold of Rs3 million for the application of withholding tax on the purchase of real estate increased to Rs4 million.

  • Appropriate legislation will be developed to give effect to the proposed changes, as agreed with all stakeholders.

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