Understanding Property Tax in Pakistan
Property transactions in Pakistan attract two federal taxes administered by FBR. Capital Gains Tax (CGT) is charged on the profit when you sell a property for more than you paid for it. Withholding Tax (WHT) is an advance tax collected at the time of purchase or sale based on the property's declared value, regardless of whether a gain exists. A third tax, Section 7E deemed income tax, applied annually to unutilized high-value properties from 2022 until it was abolished on 1 July 2026 — see the historical section below if it's relevant to a return from an earlier tax year.
Provincial property taxes (collected by Punjab, Sindh, KPK, and Balochistan Excise departments, plus cantonment boards) are separate from these federal taxes. Provincial rates vary by location, property size, and usage, and are paid annually regardless of whether any transaction occurs.
Capital Gains Tax (CGT) Schedule
CGT on property is set by Division VIII of Part I of the First Schedule to the Income Tax Ordinance 2001, which Section 37(1A) points to. That table was read directly from the Ordinance on 9 September 2026, and it turns on two things, not one.
First, when the property was acquired. For property acquired on or after 1 July 2024 the holding period is irrelevant: the rate is a flat 15% for a person on the Active Taxpayers' List at the date of disposal. For someone not on the ATL the Division I or Division II slab rates apply instead, and the statute provides that the rate “shall not be less than 15% of the gain”.
Second, for property acquired on or before 30 June 2024, the property type. There is not one ladder but three:
Open plots — 15% up to a year, then 12.5%, 10%, 7.5%, 5%, 2.5%, reaching 0% after six years.
Constructed property — 15%, then 10%, 7.5%, 5%, reaching 0% after four years.
Flats — 15%, then 7.5%, reaching 0% after two years.
A correction worth stating plainly: an earlier version of this page said plots reach 0% after eight years. That was wrong and had no source. The Ordinance gives six years for open plots, and the shorter thresholds above for the other two types.
Withholding Tax (WHT) on Property
WHT is collected at the time of property registration under Sections 236C (sale) and 236K (purchase). Filers pay a flat rate regardless of value: 2.75% when selling and 1.25% when buying. Non-filers pay considerably more — a flat 11.5% when selling, and a tiered rate when buying: 10.5% up to Rs. 50 million, 14.5% between Rs. 50–100 million, and 18.5% above Rs. 100 million. The WHT paid on sale is adjustable against the seller's final capital gains tax liability when filing the annual return; if it exceeds the actual CGT, the seller can claim a refund. Becoming a filer before any property transaction is one of the highest-value tax decisions available — a non-filer buying a Rs. 10 million property pays Rs. 925,000 more in WHT than a filer (Rs. 1,050,000 vs Rs. 125,000).
Section 7E Deemed Income Tax (Historical — Abolished 1 July 2026)
Section 7E was introduced in Finance Act 2022 to discourage hoarding of unutilized high-value properties. While it was in effect, it applied a 1% annual tax on the fair market value of any unutilized capital asset (primarily urban plots, houses, and apartments) situated in Pakistan whose value exceeded Rs. 25 million. The tax was calculated on a deemed rental income of 5% of the property value, taxed at 20% — effectively a 1% annual charge on the property value itself.
While it applied, Section 7E's exclusions included any one capital asset of the owner's choice (not specifically a home), self-owned business premises of a person on the ATL, self-owned agricultural land under cultivation (not a farmhouse), property whose income was already taxed, and remaining holdings worth up to Rs 25 million in total — the one-asset, taxed-income and Rs 25 million exclusions only for people on the ATL. It applied only to resident persons, so a non-resident overseas Pakistani was outside it altogether.
Section 7E was abolished with effect from 1 July 2026 and no longer applies to any property from that date onward. This section is kept for reference only — for example, if you are filing a return for a tax year before TY2027 (i.e. before 1 July 2026), Section 7E may still be relevant to that historical filing. For all current and future tax years, no Section 7E liability arises.
Overseas Pakistanis and Property Tax
Overseas Pakistanis frequently invest in Pakistani real estate, and for withholding tax what matters is residence, not only the Active Taxpayers List. Under clause (111AC) of Part IV of the Second Schedule to the Income Tax Ordinance, a non-resident individual holding a NICOP or Pakistan Origin Card pays the filer rates — 1.25% on purchase (Section 236K) and 2.75% on sale (Section 236C) — whether or not they are on the ATL; the higher non-filer rates do not apply to them. Turn on “Non-resident with NICOP / POC” in the Withholding Tax tab above to see this. A resident who is not on the ATL pays the non-filer rates: 10.5%–18.5% on purchase depending on value, and 11.5% on sale — for them, getting on the ATL saves about 9–17% of the transaction value. Capital gains tax on a sale depends on when the property was acquired: on or after 1 July 2024 it is a flat 15% for anyone on the ATL (and not less than 15% for anyone else); before that, the holding-period table applies. Clause (111AC) does not change capital gains tax. NICOP and POC holders can register with FBR remotely through the IRIS portal.
Remitting property sale proceeds abroad requires documentation including the FBR tax payment receipts, registration documents, and a certificate from the State Bank-authorized dealer. Property transactions by overseas Pakistanis are also subject to additional scrutiny under anti-money-laundering rules, so maintaining clean documentation is essential.
Note: Section 7E, abolished on 1 July 2026, applied only to resident persons, so a non-resident overseas Pakistani's property was outside it even while it was in force. It applies to no current or future transaction.
Frequently Asked Questions
How is Capital Gains Tax calculated on property?
It depends on the acquisition date first. Property acquired on or after 1 July 2024 is taxed at a flat 15% for a person on the Active Taxpayers' List, whatever the holding period. Property acquired on or before 30 June 2024 follows a holding-period table that differs by property type — open plots reach 0% after six years, constructed property after four, flats after two. Both rules sit in Division VIII of Part I of the First Schedule to the Income Tax Ordinance 2001.
What is the WHT rate on property?
Filers pay a flat 1.25% when buying and 2.75% when selling. Non-filers pay a flat 11.5% when selling, and a tiered 10.5%–18.5% when buying depending on property value. The WHT paid on sale is adjustable against the seller's final CGT liability.
What was Section 7E?
A 1% annual tax on unutilized properties worth more than Rs. 25 million, in effect from 2022 until it was abolished on 1 July 2026. It no longer applies to any property.
Did Section 7E apply to overseas Pakistanis?
Only if they were resident in Pakistan for that tax year. While it was in effect (until 30 June 2026), Section 7E applied to a resident person; a non-resident was outside it altogether, and residence is decided year by year under Section 82. It has since been abolished and applies to no one.
How can overseas Pakistanis become FBR filers?
Register on the FBR IRIS portal using CNIC or NICOP. The process is free and remote.
Is CGT paid on inherited property?
Inherited property is exempt from CGT when inherited. CGT applies only when the inherited property is later sold, with the holding period calculated from the date of original purchase by the deceased.