Selling a plot, house, or apartment in Pakistan triggers two separate tax obligations: withholding tax deducted right at registration, and Capital Gains Tax (CGT) on the actual profit you made, which is settled through your annual return. Understanding both before you sign the sale deed can save you from an unpleasant surprise at the registrar's office.
Withholding Tax at the Time of Sale
Property transactions carry withholding tax on both sides of the deal. As the seller, Section 236C applies to you — 3% for filers, 6% for non-filers, calculated on the higher of the DC rate or the FBR valuation for that area. The buyer faces a mirror obligation under Section 236K. Both are deducted right at the point of registration, not later.
Capital Gains Tax by Holding Period
Separately from the withholding deduction, the seller owes CGT under Section 37A based on how long the property was held before sale:
| Holding Period | Filer CGT Rate |
|---|---|
| Less than 1 year | 15% |
| 1–2 years | 12.5% |
| 2–3 years | 10% |
| 3–4 years | 7.5% |
| 4–5 years | 5% |
| Beyond 5 years (or open plots) | 0% — exempt |
Non-filers generally face flat, higher rates regardless of how long they held the property, which is one more reason ATL status pays for itself the moment you sell.
FBR Valuation vs DC Rate
FBR maintains its own property valuation tables for major cities that often differ from the local Deputy Commissioner (DC) rate. Whichever figure is higher is what gets used for withholding tax purposes — so it's worth checking the current FBR valuation table for your area before assuming your withholding bill based on the DC rate alone.
Declaring the Sale in Your Return
- List every property you own — including co-owned or mortgaged ones — in your wealth statement at cost price
- Declare any rental income earned before the sale under your income return
- Report the capital gain on the sold property in the relevant schedule of your income tax return
- Keep the sale deed, registry documents, and FBR payment challan on hand as supporting evidence
Tax Planning Tips for Sellers
- Holding an open plot past 5 years wipes out CGT entirely — worth factoring into your sale timeline
- Becoming a filer before you sell cuts your withholding tax roughly in half
- Genuine renovation and improvement costs can be added to your cost basis, reducing the taxable gain
- Inherited property must still be declared at its value on the date of inheritance, even though the inheritance itself isn't taxed