State tax is defined as a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions. Similarly, Property Tax is applied on Properties. It is a financial charge which is imposed upon a taxpayer by a governmental organization in order to fund/operate various public departments. Without taxation, public departments cannot perform their duties in an effective way. Failure to pay tax is punishable by law.

Importance of giving tax cannot be denied. It is very significant to recognize that, if you pay your taxes, you are actually paying for yourself. Since the money you pay in taxes is spent on your wellbeing at the end of the day. In addition to paying salaries of government workers, your tax money also helps support common resources, such as police and public spaces etc. Tax money helps to ensure the roads you travel on are safe and well-maintained. Taxes fund public libraries and parks. Hence it is very important to pay taxes according to your earnings.

As you know, selling and purchasing of property is a capital intensive activity, therefore the amount of tax is also sizeable. Paying taxes is not very pleasing however, if you are trying to find a way to evade them you should think twice as you might get into deep trouble with Federal Board of Revenue (or any other regulating agency).

FBR receives information – every bit of detail about your income, the investments you have made and real estate transactions, if found guilty of trying to evade taxes, FBR will send you a notice or they will charge you a penalty fee or in extreme cases they might freeze your assets. Therefore, all your efforts to outrun the law enforcement agencies they will catch up with you and make you pay taxes sooner or later. Before paying taxes, one should know the applicable property Taxes in Pakistan are.

There are many types of property taxes in Pakistan, here all of these have been discussed in great detail.

Types of property taxes in Pakistan:

  1. Individual Taxation
  2. Income Tax
  3. Property Tax
  4. Capital Value Tax

 

  • Individual Taxation:

Nonresident individuals are taxed only on their Pakistani-sourced income. You must know that, joint taxation is not allowed in Pakistan. Therefore married couples will pay tax separately. The tax year is the 1-year period ending on 30 June and is denoted by the calendar year in which it ends. For instance,

    1. The tax year 2019 is from 01 July 2018 up to 30 June 2019
    2. The tax year 2020 is from 01 July 2019 up to 30 June 2020

 

  • Income Tax

Income tax is a tax imposed on individuals or entities that varies with respective income or profits. It has two types, rental income tax and capital gains tax; 

           Rental income: It is the tax paid on income from property, including rental income. It is taxed at progressive rates and tax base is the gross rent.
           Capital gains: Capital gains in connection with a taxpayer’s business activities are considered as business income and taxed accordingly.

 

  • Property Tax

A property tax is a tax on the value of a property, usually levied on real estate. The tax is levied by the governing authority of the jurisdiction in which the property is located. This can be a national government, a federated state, a county or geographical region. It is generally levied at a flat rate of 10% but the tax rates vary, depending on the province. Property tax is levied at progressive rates in the Punjab province. In the province of Sindh, property tax is levied at a flat rate of 20% on the annual rental value of the land and building.

 

  • Capital Value Tax

Individuals who purchase real property in urban areas or acquire the right to use the real property for more than 20 years are liable to pay capital value tax. The tax is levied at 4% on the property’s recorded value. If no property value is recorded, the tax is levied at PKR100 per square yard of the property.

These are some of the most common property taxes in Pakistan. Through the property tax calculator you may also Google it, to check official websites of regulatory authorities in various provinces.