Capital Gains Tax in Pakistan: Rates, Rules & How to Calculate
Capital Gains Tax (CGT) in Pakistan is a tax charged on the profit earned from selling or disposing of certain capital assets, such as property, shares, securities, mutual funds, and other investments. The amount of tax depends on the type of asset, when it was acquired, the taxpayer's status, and the applicable tax rules.
Pakistan's capital gains tax rules have changed significantly in recent years. In particular, the rules for securities acquired on or after July 1, 2024 and immovable property acquired on or after July 1, 2024 are different from older assets. Therefore, the acquisition date is important when calculating CGT.
What Is Capital Gains Tax?
Capital Gains Tax is the income tax imposed on a gain made when a capital asset is sold or otherwise disposed of for more than its cost.
In simple terms:
Capital Gain = Sale Price − Cost of Asset
For example, if you purchase an investment for Rs. 2,000,000 and later sell it for Rs. 2,500,000, the basic capital gain is Rs. 500,000 before considering any applicable adjustments or special rules.
Which Assets Can Be Subject to Capital Gains Tax in Pakistan?
Capital gains tax may apply to gains from the disposal of different types of assets, including:
- Residential property
- Commercial property
- Plots and land
- Shares and listed securities
- Mutual funds
- Collective investment schemes
- REITs
- Certain debt securities and investment instruments
- Other capital assets where the Income Tax Ordinance applies
The tax treatment is not identical for every asset. Property and securities are governed by different provisions and rate structures.
Capital Gains Tax on Property in Pakistan
Capital gains arising from the disposal of immovable property situated in Pakistan are taxable under the Income Tax Ordinance, subject to the applicable rules and exemptions.
A major change was introduced through the Finance Act 2024. For immovable property acquired on or after July 1, 2024, the previous holding-period-based system was replaced. For a person appearing on the Active Taxpayers' List, the capital gain on such property is generally subject to a 15% rate. Different treatment can apply to persons who are not on the ATL.
Example of Property Capital Gain
Suppose you purchase a property for Rs. 10,000,000 and sell it for Rs. 14,000,000.
Capital Gain = Rs. 14,000,000 − Rs. 10,000,000
Capital Gain = Rs. 4,000,000
If the applicable CGT rate is 15%, the basic tax on the gain would be:
Rs. 4,000,000 × 15% = Rs. 600,000
This example is for illustration only. The actual tax liability can depend on the taxpayer's ATL status, acquisition date, applicable valuation rules, and other provisions.
Property Acquired Before July 1, 2024
Property acquired before July 1, 2024 can remain subject to the earlier capital-gains framework, including rules based on the holding period.
Under the older framework, the applicable rate could decrease as the property was held for a longer period. Certain types of property could eventually reach a zero capital-gains rate after the applicable holding period.
Therefore, the purchase date should always be checked before calculating CGT on a property sale.
Capital Gains Tax on Shares and Securities
Capital gains on securities are generally dealt with under section 37A of the Income Tax Ordinance. The applicable rate depends in part on when the securities were acquired and the taxpayer's status.
For securities acquired on or after July 1, 2024, the rules introduced by the Finance Act 2024 changed the previous holding-period structure. For taxpayers appearing on the Active Taxpayers' List on both the acquisition and disposal dates, the applicable rate for securities where the holding period does not exceed one year is 15%. For persons not appearing on the ATL, the applicable individual/AOP or company rate can apply, subject to the statutory minimum rules.
Older securities can have different rates depending on their acquisition date. For example, securities acquired between July 1, 2013 and June 30, 2022 have a 12.5% capital-gains rate under the applicable provision, while securities acquired before July 1, 2013 can have a 0% rate under the stated rules.
Capital Gains Tax on Stocks in Pakistan
If you make a profit by selling shares listed on the Pakistan Stock Exchange, the gain may be subject to capital gains tax.
For example, if you purchase shares for Rs. 1,000,000 and sell them for Rs. 1,300,000:
Capital Gain = Rs. 300,000
The applicable CGT rate is then applied according to the relevant securities rules, acquisition date, taxpayer status, and ATL position.
Capital Gains Tax on Mutual Funds
Capital gains from mutual funds and certain collective investment schemes can also be subject to tax. The applicable treatment depends on the type of investment and the relevant tax provisions.
Mutual funds should not automatically be treated in the same way as ordinary shares because different categories of funds and securities can have different tax treatments.
How to Calculate Capital Gains Tax
You can use the following general process to estimate your capital gains tax:
- Identify the asset that was sold.
- Determine the original acquisition cost.
- Determine the disposal or sale value.
- Calculate the capital gain.
- Check the asset's acquisition date.
- Check whether the taxpayer is on the Active Taxpayers' List where relevant.
- Identify the applicable CGT rate.
- Apply the applicable rate to the taxable gain.
- Consider any applicable withholding tax, exemptions, adjustments, or special provisions.
Capital Gain vs Sale Price
One of the most common mistakes is confusing the sale price with the capital gain.
| Term | Meaning |
|---|---|
| Purchase Price | Amount paid to acquire the asset |
| Sale Price | Amount received when the asset is sold |
| Capital Gain | Profit resulting from the disposal of the asset |
| Capital Gains Tax | Tax charged on the applicable capital gain |
For example, selling a property for Rs. 15 million does not mean that Rs. 15 million is automatically taxable as capital gain. The gain is generally determined by comparing the relevant consideration with the cost under the applicable tax rules.
Capital Gains Tax and ATL Status
The Active Taxpayers' List can be important for capital gains and related withholding taxes. FBR states that ATL status can provide lower rates of withholding tax on property transactions and capital gains on securities compared with applicable non-ATL rates.
For this reason, taxpayers should check their ATL status before completing a transaction where filer or non-filer treatment affects the applicable tax.
Advance Tax on Property Sale
Capital gains tax and advance tax collected at the time of a property transaction are not necessarily the same thing.
For example, section 236C deals with advance tax collected from the seller at the time of transfer of immovable property. The current FBR withholding tax rate card for Tax Year 2027 shows different 236C rates according to the taxpayer's ATL status and the applicable property transaction rules.
Therefore, a property seller should distinguish between:
- Capital gains tax on the actual taxable gain
- Advance tax collected at the time of sale or transfer
- Other taxes, duties, or charges that may apply to the transaction
Capital Gains Tax for Filer vs Non-Filer
| Factor | ATL / Filer | Non-ATL |
|---|---|---|
| Property transaction | Generally lower applicable advance-tax rates | Generally higher applicable advance-tax rates |
| Securities | Special CGT rates may apply depending on the acquisition date and rules | Higher or different rates may apply under the relevant provisions |
| Tax compliance | Generally more favorable withholding treatment | Higher withholding can apply |
The exact rate should always be checked against the current tax year and the specific transaction.
What Is the Difference Between CGT and Withholding Tax?
Capital gains tax is the tax liability arising from a taxable capital gain. Withholding or advance tax may be collected earlier by a withholding agent or at the time of a transaction.
Depending on the relevant section, tax deducted or collected during a transaction may be adjustable against the taxpayer's final liability or may be treated differently under the applicable tax regime.
Is Capital Gains Tax Applicable to Every Sale?
No. Not every sale automatically results in the same capital gains tax liability.
The tax treatment depends on factors such as:
- Type of asset
- Acquisition date
- Sale or disposal date
- Amount of gain
- Taxpayer's status
- ATL status
- Applicable exemptions or special provisions
- Whether the transaction falls under a special tax regime
Do You Have to Pay CGT on a Loss?
If an asset is sold for less than its relevant cost, there may be no capital gain from that transaction. However, the treatment of a capital loss is subject to the specific provisions applicable to the type of asset and taxpayer.
A capital loss should not simply be assumed to offset every type of income. The Income Tax Ordinance contains specific rules governing the treatment and carry-forward of losses.
How Capital Gains Are Reported in the Tax Return
Taxable capital gains should be properly reported in the income tax return for the relevant tax year.
Taxpayers should maintain documents showing:
- Original purchase price
- Date of acquisition
- Sale price
- Date of disposal
- Broker statements, where applicable
- Property purchase and sale documents
- Evidence of taxes already deducted or paid
- Other relevant transaction records
Good record keeping makes it easier to calculate the gain correctly and support the figures if the tax authority asks for documentation.
Capital Gains Tax Example
Consider a person who purchased an investment for Rs. 5,000,000 and later sold it for Rs. 6,500,000.
Sale Value: Rs. 6,500,000
Cost: Rs. 5,000,000
Capital Gain: Rs. 1,500,000
If the applicable CGT rate for that particular transaction is 15%, the illustrative tax would be:
Rs. 1,500,000 × 15% = Rs. 225,000
This is only a simplified example. The actual tax can be different depending on whether the asset is property or securities, when it was acquired, the taxpayer's ATL status, and other applicable provisions.
Capital Gains Tax on Property Purchased After July 1, 2024
For property acquired on or after July 1, 2024, the holding-period approach used for older property was changed. FBR's Revenue Division Year Book explains that gains on such property are subject to a 15% rate for ATL filers, while non-ATL individuals/AOPs and companies can fall under different rates according to the applicable provisions.
This means that simply saying "property becomes tax-free after six years" is not correct for property acquired on or after July 1, 2024.
Capital Gains Tax on Older Property
For property acquired before July 1, 2024, the earlier rules can still be relevant. Under those rules, the tax rate depended on factors including the holding period and type of property.
Therefore, two properties sold on the same day can potentially have different CGT treatment if one was acquired before July 1, 2024 and the other was acquired on or after that date.
Tax Year for Capital Gains
Pakistan's normal tax year is a twelve-month period ending on June 30. The tax year is identified by the calendar year in which June 30 falls.
For example, income earned during July 1, 2025 to June 30, 2026 generally falls in Tax Year 2026.
Common Mistakes When Calculating Capital Gains Tax
- Using the wrong acquisition date
- Applying an outdated CGT rate
- Confusing sale price with capital gain
- Ignoring ATL status
- Confusing advance tax with final CGT liability
- Using old property holding-period rules for property acquired after July 1, 2024
- Failing to keep purchase and sale documents
- Assuming every investment asset has the same tax rate
Frequently Asked Questions
What is Capital Gains Tax in Pakistan?
Capital Gains Tax is tax charged on a taxable gain arising from the disposal of certain capital assets, including property and securities.
How is capital gain calculated?
A basic capital gain is calculated by subtracting the relevant cost of the asset from the consideration received on disposal.
What is the CGT rate on property in Pakistan?
For property acquired on or after July 1, 2024, the applicable rules changed significantly. For ATL filers, the capital gain is generally subject to a 15% rate, while non-ATL taxpayers can be subject to different rates. Older property can remain subject to the previous holding-period rules.
Is capital gains tax applicable to shares?
Yes. Gains from the disposal of securities can be subject to capital gains tax under section 37A, with the applicable rate depending on the acquisition date, holding period where relevant, ATL status, and type of security.
Is CGT the same as property transfer tax?
No. Capital gains tax is based on the taxable gain, while advance taxes and other transaction-related taxes may be collected separately.
Does being a filer reduce capital gains tax?
ATL status can affect the applicable tax treatment and withholding rates for certain transactions. FBR specifically lists lower withholding treatment on property transactions and capital gains on securities among ATL benefits.
Do I need to report capital gains in my tax return?
Taxable capital gains should be properly reported in the income tax return for the relevant tax year, subject to the applicable tax rules.
Are all investment profits treated as capital gains?
No. The tax treatment depends on the nature of the income and the underlying asset. Profit from some activities may be treated as business income, dividend income, profit on debt, or another category rather than capital gain.
Can capital gains tax rules change?
Yes. Pakistan's tax laws can change through annual Finance Acts and other amendments. The current applicable law should therefore be checked before completing a significant transaction.
Final Thoughts
Capital Gains Tax in Pakistan depends heavily on the type of asset, its acquisition date, the amount of gain, and the taxpayer's tax status. Property and securities have separate rules, and recent Finance Acts have changed the treatment of newer assets.
For an accurate calculation, first identify the asset and acquisition date, calculate the relevant gain, check your ATL status, and then apply the current rate under the Income Tax Ordinance.
If you are calculating CGT for a property or investment, do not rely on an old rate table because Pakistan's capital gains rules have changed over time. The current FBR rules and applicable tax year should be used for the final calculation.