en.ppostnews.com: Buying property is a process which requires a lot of research and can be complicated if you are not aware of all the fees and documents involved. Property transactions don’t just involve the price of the plot, but also a number of fees related to the registration and transfer of the property. Some of these fees may differ between provinces, but in general, you will face these charges when buying a property, so you should keep these in mind with the price you are willing to pay.
Drafting a Sales Deed
The Sales Deed will not have its own fee per se, but it is a document that must be drafted by a lawyer, who you will pay. This fee will depend on the lawyer you hire, and according to Mr Junaid Idrees from Home Square, usually falls around PKR 5000.
Paying the Capital Value Tax (CVT)
This is a tax that is implemented throughout the country and is applicable on residential property of over 1 kanal and all commercial property under the Finance Act 2009. Previously, this was only implemented on urban property, but is now applicable on property all over the country. The current average rate of the Capital Value Tax is 2% of the property’s value and must be paid to the Government Treasury or the National Bank of Pakistan.
Stamp Duty on all transactions
This is a provincial tax applicable on property under the Stamp Act of 1899. It is levied at the rate of 3% of the DC rate of the property and is required for most legal documents. Recently, it was merged with the CVT for property in urban areas for easy registration and convenience for buyers. It involves all sales and transfer transactions related to property.
Withholding Tax to protect genuine buyers
This is a tax levied since 2014 which comes into action if the buyer sells the property within 5 years of buying it. According to the Finance Act 2017, it is only applicable on property valued at above PKR 4 million. Its purpose is to keep the market stable and protect the needs of genuine buyers. It is basically an advance tax on other taxes and is refundable when you file for income tax returns. The government has also set its rates to incentivise people for filing their income taxes, hence there are different rates for filers and non-filers. Buyers who file their income tax pay 2% of the FBR rate and non-filers pay 4%.
Property Tax on rental value
This is a tax which is currently valued at a certain percentage of the property’s annual rental rate as estimated by the authorities. This does not mean that it is only applicable if you rent out your property and varies between provinces. For example, in Punjab, it is % of the annual rental value, as per the Excise Department of Punjab and in Sindh, it can go as high as 25% of the property’s annual rental value.
Miscellaneous fees; Registration fee and Town Tax
These are charges implemented when you buy the property and become its owner. They are valued at 1% of your property’s value each and are necessary to show legal possession of your property.
So, you should be aware of these taxes and take them into account when heading towards a property transaction.