Property Tax, Punjab, Pakistan

What is Property Tax?

Property Tax in Punjab, Pakistan

Property Tax is the tax levied under §3 of the Punjab Urban Immovable Property Tax Act of 1958. Property Tax is assessed and collected in rating areas, which are generally urban areas only. You can ascertain its amount if you know the Annual Rental Value of a property: the property's Annual Rental Value is the base of its property tax.

Who collects property tax?

The Excise and Taxation Department, Punjab, Pakistan collects property tax. The Department also performs the following additional functions:

1. Assessing and collecting all provincial taxes except Land Revenue;
2. Enforcing the prohibition of liquor, intoxicants, and narcotics;
3. Enforcing other public health measures designed to suppress and regulate the movements of dangerous drugs and narcotic substances.

What is the scope of property tax?

The Punjab government has levied property tax only on buildings and land within the boundaries of rating areas, which are sizable towns only. For a clear legal definition of “rating area”, one may see §§ 116 and 117 of the Punjab Local Government Ordinance of 2001.

What is the base of property tax?

The property tax base is the Annual Rental Value of a property or land. Property tax is 20 or 25 percent of the Annual Rental Value of a property or land.

You can calculate the Annual Rental Value of a property using its monthly rent or monthly notional rent. For example, if a property has monthly rent or monthly notional rent of Rs 2,000 per month, its Gross Annual Rental Value is Rs 24,000, that is, Rs 2,000 x 12.

The Annual Rental Value is 90% of the Gross Annual Rental Value. It is the amount left when you deduct a 10% rebate for repairs from the Gross Annual Rental Value. For example, if the Gross Annual Rental Value is Rs 24,000, the Annual Rental Value is Rs 21,600: Rs 24,000 minus 10% of Rs 24,000 or Rs 2,400.

It is important to remember that the assessing officer who assesses a property for property tax purposes uses the monthly rent or monthly notional rent to calculate the property's Annual Rental Value. Monthly notional rent is an estimated rent per square foot of building (or per square yard of land).

How can you calculate property tax?

Property tax is 25% of the Annual Rental Value when the Annual Rental Value is above Rs 20,000 and 20% otherwise. For example, if the Annual Rental Value is Rs 21,600, property tax is Rs 5,400.

Who pays property tax?

One important point to note is that the tax is on property, not on a person. However, it is payable by the property owner. The government may collect property tax from the tenant or possessor of a property if the owner fails to pay the tax, e.g. if he is not in Pakistan, willfully avoids payment of the tax or contact with tax collectors, etc.

What measures can the Excise and Taxation Department take to recover property tax from you?
If you have any questions pertaining to property tax, feel free to ask.

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