ISLAMABAD: Federal Board of Revenue (FBR) has exempted capital gain tax on sale of immovable property under Tax Laws (Amendment) Ordinance, 2020.
A new clause (114AA) has been inserted in Part I of the Second Schedule to the Ordinance, whereby exemption from tax on capital gains has been provided to a resident individual on sale of constructed residential property (a house having land area up to 500 square yards and a flat having an area up to 4000 square feet) used only for personal accommodation by the said individual, his spouse or dependents and for which any of the utility bills are issued in the name of such individual.
As per current provisions, capital gains on disposal of constructed property whose holding period exceeds four years is zero rated. Furthermore, in case such property is sold within one year of holding period, the amount of advance tax collected under section 236C at 1 percent of sale consideration is treated as minimum tax. It, therefore, appears that the purpose of this amendment is to provide an exemption from tax on capital gains on disposal of such constructed properties, which are held for less than four years.