Day 12: Capital Gains & Property Income Tax In Pakistan — How Capital Gains and Rental Income are Taxed in Pakistan
Understanding how different forms of income are taxed is critical to being compliant and effective in tax filing in Pakistan. Capital gains and property (rental) income are two commonly overlooked yet significant sources. Let’s explore how they are treated under Pakistani tax law.
What Are Capital Gains?
Capital gains arise when you sell a capital asset (such as shares, securities, or real estate) for more than its purchase price. In Pakistan, these gains are categorized under the Income from Capital Gains head.
Capital Gains on Real Estate
The taxation of real estate capital gains depends on:
- Holding period of the property
- Type of immovable property (plot vs constructed property)
- Fair market value determined by FBR’s valuation tables
Tax Rates (As of the Latest Finance Act):
- Short-term gains (holding < 1 year): up to 15%
- Mid-term (1–4 years): 7.5% to 10%
- Long-term (holding > 4 years): exempt in some cases
Capital Gains on Shares
Capital gains on listed securities (shares, mutual funds) are taxed as follows:
- Held less than a year: 15%
- Held more than a year: reduced rate or exempt depending on the nature of security and tax year
Note: Capital losses can be used to offset capital gains under certain conditions.
What Is Property Income?
This refers to rental income derived from letting out buildings or land.
Key Points for Taxpayers:
- Taxed under Income from Property
- Deduction of 15% allowable for repairs and maintenance (standard deduction)
- Withholding tax is often deducted by the tenant
- Rental income from multiple properties is aggregated
Rental Income Tax Rates (Salaried/Non-Salaried): The rates are progressive, starting from 0% up to 35%, depending on the income slab and whether the taxpayer is a filer or non-filer.
Declaration Tips:
- Maintain proper tenancy agreements
- Collect withholding tax certificates (Form 16A)
- Report all income even if received in cash
- Consider joint ownership cases and your share of income
Penalties for Misreporting:
- Under-reporting capital gains or property income can lead to:
- Audit
- Heavy penalties
- Legal notices from FBR
Summary:
| Income Type | Tax Treatment |
|---|---|
| Real Estate Gains | Up to 15%, based on holding period |
| Stock Market Gains | Up to 15%, based on holding period |
| Rental Income | Progressive tax + 15% flat deduction |
Tax Services by MTF & Co. at One Web One Hub 
At MTF & Co., powered by One Web One Hub, we offer specialized tax filing services for capital gains and property owners. Our services include:
- Accurate computation of capital gains tax
- Rental income reconciliation and filing
- Tax planning to reduce liabilities
- Preparation of supporting documentation and FBR compliance
📞 Reach out now to ensure you’re not overpaying on your property or investment income!
📞 Call or WhatsApp: +92-336-9324829
📧 Email Support: mtfco@onewebonehub.com
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