No capital gains tax on property given to armed forces: Dar

ISLAMABAD - The recently-scheduled capital gains tax (CGT) will not be applicable on sale of land given to armed forces personnel, said Federal Finance Minister Ishaq Dar while addressing a press conference on Sunday.

Dar said said that President Mamnoon Hussain had approved ythe Income Tax Amendment Ordinance Bill 2016. He also said that the Customs Act in the Provincially Administrated Tribal Areas (PATA) would be declared non-functional in the next 24 hours.

The federal finance minister also said that the CGT would not be applicable on the first sale of plots given to the dependents of armed forces personnel who had been killed in the line of duty.

"CGT will not be applicable on the sale of plots given to personnel of the armed forces," said the minister.

"When a plot of land is sold by the dependents of martyrs for the first time, CGT will not be applicable," added Dar.

Earlier, Dar also announced that in the future, property valuation tables would be notified by the Federal Board of Revenue (FBR).

The FBR will now determine the prices of property and all transactions will be done through a transparent process, Dawn News Reported.

CGT on property has been raised to 7 per cent on property held between 1-2 years, and 5pc on property held between 2-3 years.

Major points of CGT

Valuation has been agreed for major cities

Evaluation tables will be notified by FBR instead of valuation by SBP approved valuers

Till such time and for those areas for which no valuation tables are notified, DC rate will apply

Holding period for CGT has been reduced from 5 to 3 years

There will be no CGT on property held for more than 3 years. Properties acquired on or after 1st July 2016:

If holding period is up to 1 year – CGT 10%

If holding period is between 1 and 2 years – CGT 7.5%

If holding period is between 2 and 3 years – CGT 5%

If holding period is more than 3 years – CGT 0% / exempt

Properties acquired before 1st July 2016:

If holding period is less than 3 years – CGT 5%

If holding period is more than 3 years – CGT 0% / exempt

Valuation will apply on (i) CGT (ii) withholding taxes (iii) for the purposes of sec 111.

Basic threshold of Rs3 million for application of withholding tax on purchase of immovable property enhanced to Rs4 million.

Appropriate legislation will be done to give effect to the proposed changes as agreed with all stakeholders.