11/01/2020
CAPITAL GAIN TAX ON PROPERTIES
up to tax year 2019 capital gain on sale of property was as under
capital gain on immovable property was separately taxed on the basis of holding period of property.
Holding period
one year rate 10 % on capital gain
two year rate 7.5 % on capital gain
third year rate 5 on capital gain
if property holding period was more than 3 year then the rate is zero on capital gain it means after selling 03 year the property capital gain tax was zero we will have to show capital gain but full amount will be exempted
capital gain = cost of the assets -sale consideration
Capital gain tax will be paid by the seller and this tax will be adjustable
above method will be used till tax year 2019 but now govt has changed the capital gain tax procedure
CAPITAL GAIN TAX FROM TAX YEAR 2020 & ONWARD
if now you sale constructed property holding period is 4 years
if you sale open plot file holding period is 8 year after that
period no tax on capital gain but if you sale 1st year
100 % gain will be taxable
How ever if the period exceeds one year but does not exceed eight years in the case of open plot file and four years in the case of constructed property, 75% of the gain will be taxable.
After selling holding period tax rate is zero
It is further clarified that form of immovable property, whether open plot or constructed, will be determined at the time of sale of immovable property.
Example: Mr. B purchased an open plot on 22.09.2019 which cost him Rs 2,000,000. The plot was sold on 25.03.2020 at Rs.8,000,000. Another constructed property was acquired on 05.09.2019 at Rs.8,000,000 and sold at Rs. 12,000,000 on 23.05.2020.
Assuming that both properties were acquired and sold as per value notified by the Board, the capital gain and tax thereon is calculated as under:-
As the holding period of plot is up to one year, gain on sale of plot = 8,000,000 -2,000,000 = Rs.6,000,000
As the holding period of constructed property is up to one year, gain on sale of constructed property = 12000,000 – 8000,000 = Rs.4,000,000
Total capital gain Rs.6,000,000 + Rs.4,000,000 = 10,000,000
As the total capital gain is not more than Rs.10 million but less , it will be taxed at 10% and tax payable will be Rs.1,000,000
NOTE : Capital gain tax depend upon on holding period & amount of gain .
OPEN PLOT
Holding Period Gain Tax
Up to One Year 100%
2 – 8 Years 75%
Above 8 Years No Tax
CONSTRUCTED PROPERTY
Holding Period Gain Tax
Up to One Year 100%
2 – 4 Years 75%
Above 4 Years No Tax
TAX RATE on amount of Capital Gain during the year
CAPITAL GAIN RATE
Up to 5 Million 5%
6 to 10 Million 10%
11 to 15 Million 15%
Above 15 Million 20%
Clause (9) Capital gain on
disposal of immovable property
by ex-servicemen and serving
personnel of Armed Forces or exemployees or serving personnel of
Federal and Provincial
Governments
The bill seeks to provide exemption by
inserting a new clause, whereby tax payable
under head of capital gain derived from
disposal of immovable property shall be
reduced by 50%, subject to the conditions
that such capital gain is derived on the first
sale of immovable property acquired or
allotted to ex-servicemen and serving
personnel of Armed Forces or ex-employees
or serving personnel of Federal and Provincial
Governments, being original allottees of the
immovable property, duly certified by the
allotment authority.
Contact for filing Income tax returns.
