The Finance Minister recently announced the Budget for 2022-23, and it was expected to impact the real estate sector significantly. This Budget has laid out plans to revive the economy by focusing on infrastructure development. We will take a closer look at some of the key announcements that will likely impact the Pakistan real estate market.
Capital Gain Tax
The most significant change in this Budget for the real estate sector is the increase in Capital Gain Tax (CGT). CGT has been increased for all the properties. This will increase the cost of property investment, as investors will be required to pay more Tax on the sale of their property. Below is the table to depict the % of increased taxes.
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For example: if you buy a property for 5 crores. And after 1 year the property price is 6 crores, and here the profit is 1 crore. If you sell the property for 6 crores and the CGT is 15%, you need to pay 15 lacs from the profit. This will negatively impact the real estate and construction business.
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Rental Income Tax increased
Another change that will impact the real estate sector is the increase in rental income tax. This will increase the cost of living for those renting property, as they will be required to pay more Tax on their rental income. There is a condition with this raise in Tax. If your house is worth 2.5 crores or more, you must pay 20% of the rental income. For example, if you are getting 10 lacs rent for a house, then you need to pay 2 lacs as Tax. It will also discourage those who are willing to earn rental income.
Advance Tax increased
Another change that will impact businesses is the increase in advance tax. Businesses pay advance tax on their estimated annual tax liability. The increase in advance tax will increase the cost of doing business for those who are involved in the real estate sector. The Tax for filers is now 2%. And for non-filers, the Tax is 5% in this Budget.
Tax reduced for salaried class
There is some good news for the salaried class in this Budget, as the government has announced a tax reduction for employees. This will somehow result positively for the people.
Overall the Budget for 2022-23 is not looking investors-friendly. The increase in taxes will badly impact the real estate industry and the construction industry as well. We hope the increase in taxes will provide expected results to the government of Pakistan. You can visit our website for more updates about the real estate industry. We provide a free consultation to the investors. For booking or any real estate query, you can contact us anytime.
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