Real Estate in the dock: Finance Act of 2024
February 2025
Reading Time: 5 minutes
The Finance Act of 2024 has raised capital gains tax on real estate transactions and dispenses with the holding period concept.
The tax net has been tightened further for non-filers, ensuring higher penalties for non-compliance with FBR.
The Finance Act of 2024 has created an additional hurdle for the real estate industry. Before the Finance Act 2024, tax on capital gains for sale of immovable properties was tied to the holding period of the property. Properties held for less than 1 year before disposal (i.e. sale) had their capital gains taxed at the maximum rate of 15%, but the treatment of capital gains for properties held longer than 1 year was progressively lesser.
For plots of land with no construction, it went to 0% for plots held for 6 years or longer.
For constructed properties, it went to 0% if those properties were held for more than 4 years.
For flats, it went to 0% if the flat was held for more than 2 years.
The tax details for different properties are summarized in the tables below:
| Property Type | Period held | Tax Rate on Capital Gains |
| Open Plot | < 1 year | 15 % |
| Open Plot | > 1 year and < 2 years | 12.5 % |
| Open Plot | > 2 years and < 3 years | 10 % |
| Open Plot | > 3 years and < 4 years | 7.5 % |
| Open Plot | > 4 years and < 5 years | 5 % |
| Open Plot | > 5 years and < 6 years | 2.5 % |
| Open Plot | > 6 years | 0 % |
Source: Finance Bill 2024
| Property Type | Period held | Tax Rate on Capital Gains |
| Constructed Property | < 1 year | 15 % |
| Constructed Property | > 1 year and < 2 years | 10 % |
| Constructed Property | > 2 years and < 3 years | 7.5 % |
| Constructed Property | > 3 years and < 4 years | 5 % |
| Constructed Property | > 4 years | 0 % |
Source: Finance Bill 2024
| Property Type | Period held | Tax Rate on Capital Gains |
| Flats | < 1 year | 15 % |
| Flats | > 1 year and < 2 years | 7.5 % |
| Flats | > 2 years | 0 % |
Source: Finance Bill 2024
The Finance Act 2024 dispenses with the holding period concept altogether. Instead, any property that is sold off, regardless of the period it is held for, will now have its capital gains taxed at a flat 15% for tax filers. For non-filers, the tax rates will be even higher. The taxable income from property sales will be treated as income and taxed according to the relevant income tax bracket but, as the Finance Act 2024 clearly stipulates, will not be less than 15% of the income and can reach up to 45%.
This is applicable to all properties acquired on and after July 1, 2024. For properties acquired before July 1, 2024, the previous tax rates mentioned above will still be applicable.
Sources:
https://www.fbr.gov.pk/Budget2024-25/FinanceBill/Finance-Bill-2024.pdf
https://pakistanpropertyservices.com.pk/budget-2024-2025-real-estate-market-heavy-tax/
