Property Tax in Pakistan

Property Tax in Pakistan

Property Tax in Pakistan is a local tax on properties. A local tax is a tax that falls in jurisdiction of a local government as against federal and provincial taxes which fall in jurisdiction of the federal and provincial governments respectively. All the four provinces have their legislation on the property tax assessment and collection. The laws are:

1. The Punjab Urban Immovable Property Tax Act 1958;
2. The Sindh Urban Immovable Property Tax Act 1958;
3. The Khyber-Pakhtunkhwa Urban Immovable Property Tax Act 1958; and
4. The Balochistan Urban Immovable Property Tax Act 1958.

These laws are similar in nature and mechanism for assessment and collection of Property Tax. Hence, if you are good at understanding and using tax payment system in a province, you can easily translate your knowldge for use in other provinces.

Property tax is calculated on the value of a property; the value in turn is assessed value of the property, not market value.

Property Tax in Pakistan is a local tax, but it is not assessed and collected by the local government. Four provincial governments collect this tax for local governments. They get collection charges of 15% and give the rest of collection (85%) to their local governments in ratio of tax collected from the geographical areas under the local governments.

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How to use Property Tax Calculator

What are the property tax rates in Punjab, Pakistan

What is PT1?

Property Tax assessment procedure in Sindh, Pakistan

How Properties are Assessed

Property tax payable for a given property is based on Annual Rental Value (ARV) of that property. ARV, in turn, is assessed according to the reasonable prevailing rental rates for similar properties within the same locality. For this purpose, each mohalla, colony, town, road, street, etc. belongs to one of seven assessment categories (A, B, C, D, E, F, and G). The Excise & Taxation Department has created tables showing various rates per square yard for land area, and per square foot for covered area (i.e., buildings), for each category.

There is one table for residential valuations and one for commercial valuations. Within each table, different rates are given depending on whether the property is (a) used by the owner or rented and (b) on a main road (one at least 30 feet wide) or off road. The residential table shows different rates for the first 500 square yards of land area and 3,000 square feet of covered area. The land area rates in the commercial table also change above 500 square yards, and the covered area rates are divided into three as ≤1,500 / 1,501 – 3,000 / > 3,000 square feet.

There are special rules for certain types of properties, but to find ARV for general residential and commercial properties, use the following method:

1. Multiply the land area of the property by the applicable rate. 
2. Multiply the covered area of the property by the applicable rate.
3. Add the above, then multiply by 12 to get Gross Annual Rental Value (GARV). 
4. Take GARV less 10% to arrive at ARV.

As a simple example, suppose you own and live in a 1,350 square foot residential house on a 200 square yard lot fronting a main road in a Category A locality:

1. 200 sq yd x 0.40 = 80 
2. 1350 sq ft x 0.40 = 540
3. 80 + 540 = 620 x 12 = 7440 
4. 7440 – 10% = 6696

Thus, your property's ARV is assessed as Rs 6,696.

Property Tax, Sindh, Pakistan

Property Tax in Karachi

Property taxes in Karachi are governed by the Sindh Urban Immovable Property Tax Act, 1958, and associated rules. Section 3 of the Act provides for the collection of taxes based on properties' Annual Rental Value (ARV) according to Section 5. 

Empowered by Section 5A of the Act, the Sindh Government has developed a valuation table which makes it simple to find ARV for a given property. The table separates Sindh's cities, referred to as “rating areas”, into five groups. These groups are themselves divided into four zones depending on local socioeconomic conditions. Different rates are listed for each zone in each group.

The rates are to be applied to the square yardage of a plot of land and the square footage of any buildings (“covered area”) on the land. ARV can be found by multiplying these areas by twelve, adding them together, and subtracting a ten percent allowance for repair and maintenance. Annual property tax is calculated as 25% of this ARV.

Some deductions exist for various specific types of properties, and Section 4 of the Act exempts the following properties from tax altogether:

• Government-owned properties
• Properties with ARV of no more than Rs 864
• Residential buildings on land not over 120 square yards in area
• One residential space of 600 square feet or less on any floor of a building
• Libraries, parks, playgrounds, places of worship, orphanages, cemeteries, cremation grounds, etc.
• Properties owned by widows, orphaned children, and disabled individuals with ARV no more than Rs 48,000
• Properties listed as protected heritage under the Sindh Cultural Heritage (Preservation) Act, 1994 (except those in commercial use)

Taxes and any penalties relating to a property are generally recovered from the property's owner under Section 16 of the Sindh Urban Immovable Property Tax Act, 1958. However, Section 14 of that Act allows recovery from the tenant of a property as well. Unpaid taxes are also recoverable under the Sindh Land Revenue Act, 1967.

Responsibility for property tax assessment, collection and related appeals is vested in officials at several levels. First, an Assessing Authority in each rating area performs most basic assessment and collection tasks. Above the Assessing Authority is a Director, who also carries out some collection functions, and who additionally hears appeals regarding valuation and other issues. (An appeal may be filed within 30 days of receiving an order from the Assessing Authority.) Finally, the Director General of the Excise & Taxation Department is responsible for hearing appeals against the judgment of a Director (known as revision petitions), which must be filed within one year of such judgment. The Director General may also initiate a review of a Director's decision on his own initiative.

How to use the Property Tax Calculator

How to use the Property Tax Calculator

The Punjab Excise & Taxation Department provides a convenient online Property Tax Calculator that lets you find the tax liability for your property quickly and easily. What follows is a step-by-step guide to using the Property Tax Calculator.

Before visiting the site, you'll need to gather some basic information about your property:
1. Total land area in square yards;
2. For any buildings,

• Type (what a building is used for),
• Area in square feet,
• Whether rented or owner-occupied, and
• Year of construction;

3. Residential and/or commercial assessment categories of your locality (although you can find these on the site if you don't know them); and
4. Whether your property is on a main road or off road (roads at least 30 feet wide are considered main roads).

Once you've assembled this information, you're ready to visit the Property Tax Calculator. It seems to work best with Google's Chrome browser.

Suppose you have a property with a total area of 210 square yards, situated on a main road. It has buildings, constructed in 2001, consisting of two rented shops of 120 square feet each, one rented house on the ground floor measuring 1080 square feet, and an 810 square foot owner-occupied residential portion on the first floor. The locality is Category A for both commercial and residential properties.

Go to the Property Tax Calculator and proceed as follows:

1. Find Occupier's Information at the upper left of the screen. This is where you can enter information about the buildings on your property.
2. The first information to be entered is about "portions". A portion is a part of a floor. In our example, the ground floor has two portions: shops and a house. Select "G" for ground floor and then "1".
3. After selecting "shop" for type of building use, entering "120" for covered area in square feet, and choosing "rented" under self or rented, click the add button at the right. You should see the details of the shop displayed below the area where you have entered the information.
4. Follow the same procedure for the other building portions, increasing the number for additional portions on the same floor – you should use "G2" for the second shop and "G3" for the rented house. For the owner-occupied first-floor house, use "F1".
5. When you've entered all the building information, look below for the section entitled Information Required for Calculations of GARV. Enter "210" for total land area of property (total covered area has been calculated for you) and "2001" for year of construction.
6. Since you know that your locality is Category A, you can click the circles next to A. Also click the one for main road. (If you don't know your category, you can click the green text to find it.)
7. Then click the button to calculate your tax, which in this example should come to Rs 24,526. The amount will be displayed in a pop-up window, and you'll be given the option to view the detailed calculations if you wish.

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Property Tax Calculator

Punjab, Pakistan: Property Tax Survey, Part 4

Property Tax Survey in Punjab, Pakistan

The government of the Punjab has carried out Property Tax Survey 2013-14 in the province to increase revenue from property tax. The Excise and Taxation Department, Punjab, started survey work in July 2013 and had completed most of it by December 2013. As part of the survey process, the Department began computerization of property tax records in major cities of the Punjab, including Lahore, Rawalpindi, Faisalabad, and Multan.

The basic purposes of a property tax survey are to:

1. Record changes in the particulars of properties, e.g., new construction, additions and deletions, etc;

2. Record changes in occupancy of properties, for instance, a change from owner-occupied property to rental property;

3. Record changes in use of property, such as a switch from residential use to commercial use; and

4. Record other changes e.g. ownersip.

When these changes are brough on record, they change your Property Tax Bill. Therefore, you may get a revised bill in the months from January to June 2014. The revised property tax liability will be legal and valid despite there is no change in the property tax rates because of the discussion above i.e. difference in previousely recorded and currently recoreded details of a property.


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Punjab Pakistan: Property Tax Survey 2013-14
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Punjab, Pakistan: Old Rates of Property Tax are Here Again

What are the Property Tax Rates in Punjab, Pakistan?

The government of the Punjab had decreased the property tax rate on the value of urban immovable properties, but had increased the valuation rates of such properties. The net effect of this increase in property valuation alongside a decrease in tax rates was a higher property tax liability for property owners. This change was meant to be tactful, but the end result of increased prospective tax liability was not acceptable to the business community and other stakeholders, and there was a a certain amount of unrest. Ultimately, the government took back the decision to change the rate, and the old rate has been restored today.

Now, the effective rate of tax begins at 20% and the schedule of valuation is the same as it was in 2013. As before, if Gross Annual Rental Value exceeds Rs 20,000, the effective tax on the value is 25%.

The essence of all this is that:

1. The Property Tax Schedule for valuing properties has not been revised;

2. Property tax rates are the same as those in 2013;

3. There is no change in your tax bill if you have already correctly recorded your property in the property tax records; and

4. There will be a change in your property tax bill if you have a property which had previously been under-assessed, or un-assessed.

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What are the property tax rates, Punjab, Pakistan for 2013?

Personal Property and Real Property

Property tax is a tax on property, and property can be of two broad types: personal property and real property. Governments levy taxes on personal and real property differently.

What is Personal Property?

A property is a valuable thing belonging to someone. There are several types of property, and several methods to classify these types. One such method divides the types into two categories: 

1. Personal property; and
2. Real property.

A personal property is a property that is not land, a building, or any other thing permanently attached to land. For example, a Suzuki Cultus belonging to Raheela Rao is her personal property.

What is a Real Property?

A real property or real estate is land, a building, or any other thing permanently attached to land. For example, the house of Moona Mighan is her real property.

Another name for real property is immovable property. In most civil law jurisdictions, real property is called immovable property and personal property is called movable property. It is common sense that anything permanently attached to land, and the land itself, are not movable – they are immovable properties. On the other hand, a car is a personal or movable property because it is not immovable.

Taxation of Personal and Real Property

Governments around the world levy taxes on personal and real properties differently due to their different natures. Real property, or real estate, usually continues to increase in value, but personal property normally decreases in value. The most common reason for this decrease in value is depreciation with use or the passage of time.

An example of a tax on personal property or movable property is Token Tax, and an example of a tax on real property is Property Tax.

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