Capital Gain Tax is payable on any gain arising from the sale or disposal of a capital asset (immovable property) during a tax year and is taxable under the head “Capital Gains”.
The Capital Gain Tax is described in section 37 of the Income Tax Ordinance 2001. Any gain or profit arising from the disposal of a capital asset in a tax year, other than the gain exempt under the ordinance is chargeable to tax under this head of income.
The term capital asset for this purpose means property of any kind excluding stock in trade, consumables or raw materials held by the person for the business, any property for which depreciation or amortization under sections 22 and 24 of ITO 2001 respectively is allowed or any property that is in personal use of the person or a family member who is dependent upon him.
Computation of Capital Gain on Disposal of an Asset
The capital gain on the sale of an asset is computed by the following formula:-
Capital Gain = A – B
Where A is the amount received on the sale/disposal of the asset, and; B is the cost of acquiring that asset.
Rates of Capital Gain Tax 2023
The applicability of capital gain tax depends upon the holding period of different types of properties. The more the holding period of property the lesser the impact of the tax on the gain on sale or disposal. No tax on capital gain is levied if the holding period of the property exceeds the minimum holding period as applicable for different classes i.e. plots, flats, and constructed buildings. The rates of tax for capital gains with reference to their holding period are defined in Division VIII of Part I of the First Schedule of the Income Tax Ordinance 2001 and are as under:-
| Sr No | Holding Period | Rate of Tax | ||
|---|---|---|---|---|
| Plot | Constructed Property | Flats | ||
| 1 | Less than one year | 0.15 | 0.15 | 0.15 |
| 2 | Exceed one year and up to two years | 0.125 | 0.1 | 0.075 |
| 3 | Exceeds two years and up to three years | 0.1 | 0.075 | 0 |
| 4 | Exceeds three years and up to four years | 0.075 | 0.05 | 0 |
| 5 | Exceeds four years and up to five years | 0.05 | 0 | 0 |
| 6 | Exceeds five years and up to six years | 0.025 | 0 | 0 |
| 7 | Exceeds six years | 0 | 0 | 0 |
Disclaimer
“The contents of this post are intended for informational and educational purposes only and are based on data gathered by Team Fiscal Updates. It is important to note that the information provided here should not be relied upon as a reference for any legal documents. If you require assistance with legal decisions, it is recommended to seek proper professional advice. It may also be noted that the provisions of the Income Tax Ordinance 2001 have an overriding effect on all other laws of the country and shall prevail in case of any contradiction in terms of Section 3 of the Ordinance”