Capital gains tax applies to the profit you make when you sell property, shares, or other capital assets — and in Pakistan, the rate you pay depends heavily on how long you held the asset before selling. Hold long enough, and the tax often disappears entirely. Sell too soon, and you can lose a meaningful chunk of your gain.
Property CGT: The Holding-Period Table
Under Section 37, capital gains tax on immovable property scales down the longer you hold the asset:
| Holding Period | Open Plot | Constructed Property |
|---|---|---|
| Less than 1 year | 15% | 15% |
| 1–2 years | 12.5% | 10% |
| 2–3 years | 10% | 7.5% |
| 3–4 years | 7.5% | 5% |
| 4–5 years | 5% | 0% |
| 5–6 years | 2.5% | 0% |
| More than 6 years | 0% | 0% |
Constructed property becomes fully CGT-free after four years; open plots take six. This is a large part of why long-term real estate holding is treated so favourably compared to quick flips.
How the Gain Itself Is Calculated
The formula is: capital gain = (sale price or FBR-notified value, whichever is higher) minus (purchase price or FBR-notified value at purchase, whichever is higher). FBR won't let you undervalue a sale on paper to dodge the tax — if your declared price is below the official DC/FBR value for the area, the official value is used instead.
Example: a plot bought in 2023 for Rs. 4,000,000 (FBR value at the time: Rs. 3,500,000) sold two years later for Rs. 7,000,000 (FBR value: Rs. 6,500,000). Sale price for CGT purposes is Rs. 7,000,000, cost is Rs. 4,000,000, giving a gain of Rs. 3,000,000. At the 2–3 year open-plot rate of 10%, that's Rs. 300,000 in CGT.
Shares and Securities
| Security | Holding Period | CGT Rate |
|---|---|---|
| Listed shares (PSX) | Under 1 year | 15% |
| Listed shares (PSX) | 1–2 years | 12.5% |
| Listed shares (PSX) | Over 2 years | 0% |
| Equity mutual fund units | Under 1 year | 15% |
| Equity mutual fund units | Over 1 year | 0% |
| Unlisted company shares | Any period | 10% |
For listed securities, your broker's NCCPL annual certificate does the gain calculation for you across all trades in the year — you simply attach it and report the figures in your return.
CGT Isn't the Same as Section 7E
These two get confused often. CGT is a one-time charge in the year you sell, based on the actual profit. Section 7E "deemed income" tax, by contrast, is an annual charge just for holding certain non-productive immovable property — calculated on a notional rental value whether or not the property earns you anything. A plot you hold for five years could attract Section 7E every single year and then CGT in the year you finally sell it. Both need separate handling in your return.
When CGT Doesn't Apply at All
- Open plots held beyond six years, or constructed property beyond four years
- PSX-listed shares held beyond two years; equity mutual fund units held beyond one year
- Agricultural land, which sits outside the CGT framework entirely
- Sales at a loss — no gain means no CGT, though you should still declare the transaction
- Inherited property, at the point of inheritance itself (tax applies only to the gain above fair market value at the date of inheritance, when you eventually sell)
Declaring Gains in Your Return
- Gather the registered sale and purchase deeds, plus the CPR for any Section 236C withholding deducted at transfer
- Calculate the gain using the higher-of-actual-or-FBR-value rule on both ends
- Enter it in the capital gains schedule of your IRIS return, selecting the correct asset class and holding period
- Claim the 236C withholding as an adjustable credit against your final CGT liability
- Update your wealth statement — remove the sold asset from closing assets and make sure the sale proceeds show up somewhere in cash, bank, or reinvestment
That last step trips up more people than any other. FBR cross-matches property registrar data against wealth statements, and a sold property that's still sitting in your declared assets — or sale proceeds that never appear anywhere — both tend to generate automated notices.
Cryptocurrency and Virtual Assets
Gains from selling or exchanging virtual digital assets — cryptocurrencies and NFTs included — are treated as capital gains under the Income Tax Ordinance. The gain is the difference between the PKR-equivalent sale price and the original acquisition cost, and it applies not just to cashing out to rupees but to trading one cryptocurrency for another as well. Unrealised holdings don't get taxed, but they still need to appear in your wealth statement, and FBR is increasingly cross-referencing data from exchanges and payment platforms.
Ways to Legally Reduce CGT
- Simply hold longer — the rate schedule rewards patience more than almost any other legal strategy available
- Keep records of renovation and improvement spending, which raises your cost basis and lowers the taxable gain
- Deduct legitimate transaction costs — legal fees, registration charges, brokerage commissions
- Offset gains against any capital losses from the same year, or carry unused losses forward up to three years