Capital Gains Tax (CGT) The example below will further clarify this:
A person buys a 5-marla plot at a price of PKR 2,000,000 at the beginning of 2017. For the purpose of this example, let’s assume that the rate of inflation remains stable at 7% each subsequent year. Then, the NPV of the property in 2018 will be PKR 2,140,000; in 2019, it will be PKR 2,289,800; and, in 2020, it will be PKR 2,450,086.
Then, if the person sells the property after three years at a price of PKR 2,500,000, here’s how they will be calculating their actual gains:
| Price paid at the time of purchase | PKR 2,000,000 |
| Price received at the time of sale | PKR 2,500,000 |
| NPV at the time of Sale (Three years later) | PKR 2,450,086 |
| Actual Gains | 49,914 |
Therefore, the actual gains for the person’s income will be calculated at PKR 49,914 and they will be taxed on this value.
In the bill on the other hand, the calculation of capital gains have been provided in the following manner:
In case of plots
- The plot is sold within the first year of purchase, 100% of the gains will be taxed.
- The plot is sold after the first year but before ten years of purchase, 75% of the gains will be taxed.
- If the property is sold after 10 years of purchase, no gains tax will be levied.
In case of constructed property
- If the property is sold within the first year of purchase, 100% of the gains will be taxed.
- If sold after one year but before the elapse of the fifth year, 75% of the gains will be taxed.
- Gains will not be taxed if the property is sold after five years of ownership.
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