Every time a property deal closes in Pakistan, both the buyer and the seller walk away with a tax bill. Yet most people entering a deal assume only one side pays. That assumption leads to great surprises at the registry office, missed cash arrangements, deals falling apart at the last moment, or thousands of rupees in penalties for under-declaration.
Who is responsible for paying the capital gains tax when transferring an asset? In summary, taxes are paid by both parties, although at different times. This article provides the current FBR rates under the Finance Act 2025, explains which party is responsible for each tax, and outlines all taxes applicable to real estate transactions in Pakistan so that you can approach your next purchase with confidence.
What Is Gain Tax on Property Sale in Pakistan?
The term “gain tax” most directly refers to Capital Gains Tax (CGT), the tax FBR levies on the profit a seller earns from selling immovable property. FBR computes the gain tax on the sale of property under Section 37 of the Income Tax Ordinance, 2001, on the net profit: sale price minus acquisition cost.
But in Pakistan, the property tax landscape extends well beyond CGT. FBR also collects two advance withholding taxes at the time of transfer, one from the buyer and one from the seller, making property transactions a dual-tax event. Understanding all three taxes together answers the question of who pays what and how much.
The Three Property Taxes Every Buyer and Seller Must Know
Before getting into rates and obligations, here is a clear map of what each party faces:
| Tax | Who Pays | Legal Basis | Nature |
| Section 236K | Buyer | Income Tax Ordinance | Advance withholding tax |
| Section 236C | Seller | Income Tax Ordinance | Advance withholding tax |
| Capital Gains Tax (CGT) | Seller | Income Tax Ordinance | Tax on profit from the sale |
| Section 7E (annual) | Property owner | Income Tax Ordinance | Deemed income tax |
The buyer carries one tax. The seller carries two, and in practice, three if you count the annual Section 7E deemed income tax obligation. This structure makes the seller’s gain tax on property more burdensome overall, but buyers still face a high cost, particularly non-filers purchasing high-value properties.
Buyer Tax on Property: Section 236K
Section 236K of the Income Tax Ordinance places a clear and direct obligation on the buyer. The registering authority, DHA, LDA, a housing society, or a Sub-Registrar collects this advance income tax from the buyer at the time FBR transfers the property.
FBR calculates the buyer tax on property as a percentage of the FBR-notified fair market value of the property, not necessarily the stated sale price. If FBR’s notified value exceeds the agreed sale price, the higher figure determines the tax base.
Key rules for buyers:
The following are the key rules for the buyers
- Active filers can adjust the Section 236K amount on their annual income tax return, meaning the FBR treats it as an advance payment rather than a final cost, and refunds any excess.
- Non-filers lose this adjustment right entirely. Whatever they pay under Section 236K stays with FBR as a final, permanent deduction.
- The buyer bears this tax alone. The seller carries no portion of 236K unless both parties privately negotiate a split, which carries no legal standing with FBR.
Seller Tax on Property: Section 236C
The seller is responsible for the other advance withholding tax. Section 236C requires the registering authority to deduct advance income tax directly from the gross consideration the seller receives at the time of transfer.
FBR bases this calculation on the gross sale value, the higher of the actual consideration or the FBR-notified fair market value. The seller’s tax under 236C is applied to the seller’s proceeds before they reach the seller’s account.
Key rules for sellers:
The following are key rules for sellers. Also check the guide for the property tax for filer vs non-filer in Pakistan.
- Active filers can adjust the 236C amount against the CGT liability in their annual return. If the 236C advance already exceeds the CGT due, FBR processes a refund the seller effectively pays only the net difference.
- Non-filers pay 236C as a final cost and still face a separate CGT liability on the same Gain. FBR does not allow non-filers to offset 236C against CGT.
- The seller’s tax burden under 236C on a Rs. 100 million deal means the seller loses Rs. 5.5 million as an active filer or Rs. 11.5 million as a non-filer before capital gains tax even enters the picture.
Gain Tax on Sale of Property: Capital Gains Tax (CGT)
The seller also pays Capital Gains Tax, the capital gains tax on the sale of property in Pakistan. Also, this is the tax that the FBR levies on the actual profit from the transaction, and it falls under Section 37 of the Income Tax Ordinance.
The CGT structure FBR applies depends entirely on when the seller acquired the property.
Pre-July 2024 Acquisitions: Holding Period Slabs
For property bought before June 30, 2024, FBR applies a sliding CGT rate that falls with holding time:
| Holding Period | CGT Rate |
| Year 1 | 15% |
| Year 2 | 12.5% |
| Year 3 | 10% |
| Year 4 | 7.5% |
| Year 5 | 5% |
| Year 6 and beyond | 0% |
A seller who bought a plot in 2018 and sells it today pays 0% CGT on the Gain, the most powerful remaining tax incentive in the Pakistani real estate market. FBR applies these slabs to the rate itself regardless of filer status, though non-filers still lose the 236C adjustment advantage.
Acquisitions After July 2024: Flat Rate
For all real estate purchased on or after July 1, 2024, the waiting period benefit gets eliminated by the Finance Act 2024. No matter the length of time the vendor held the asset, FBR now levies a flat CGT rate:
Active filers: 15% of net Gain, at any holding period
Non-filers: General income slab rates of 15% to 45%, depending on total income. This structural change makes filer status far more important for anyone who bought property in or after 2024. A non-filer selling a property bought last year on a Rs. 25 million Gain pays Rs. 7.5 million to Rs. 11.25 million in CGT. An active filer on the same Gain pays Rs. 3.75 million, with the 236C advance deducted from that amount.
How FBR Calculates Net Gain
FBR computes the gain tax on sale of property as:
Net Gain = Sale Price – Cost of Acquisition
For property gifted or inherited, the FBR-notified value at the time of receipt gets used as the acquisition cost. The seller then reports this Gain in their annual income tax return, adjusts the 236C already paid, and settles any remaining CGT balance.
Withholding Tax on Sale of Property in Pakistan: How Collection Works
Both Section 236C and Section 236K fall under the category of withholding tax on the sale of property in Pakistan. FBR collects them directly through the registering authority before money changes hands between buyer and seller. Also, this is what makes them “advance” taxes: FBR secures the revenue before anyone can delay or dispute it.
The withholding tax on sale of property in Pakistan operates through a PSID (Payment Slip ID) system. Before any transfer, the registering authority generates a PSID on FBR’s online portal. The buyer and seller each pay their respective amounts against separate PSIDs. The registering authority confirms payment before completing the transfer. No payment, no transfer.
Key points about the withholding collection mechanism:
The withholding agent (registering authority) is legally liable for collecting the correct amount. If they collect less than FBR requires, FBR pursues the registering authority first.
Both buyer and seller must bring payment confirmation (payment receipts or PSID payment proof) to the registry appointment.
For Overseas Pakistanis holding NICOP or POC cards and spending fewer than 183 days in Pakistan per year, FBR allows withholding at filer rates even without a filed return, subject to Commissioner verification. Under-declaration of sale price to reduce withholding triggers FBR Section 176 penalties plus the difference in tax, and FBR’s own valuation tables override any stated price below the notified rate.
Who Will Pay Gain Tax on Property: Common Transaction Scenarios
Who will pay gain tax on property depends on the deal structure, but here are the most common scenarios and how FBR treats them:
Scenario 1
Direct resale of a bought property. Also, the seller pays CGT on the Gain and 236C on the sale value. The buyer pays 236K on the purchase value. Neither party carries the other’s tax obligation.
Scenario 2
Gifted or inherited property. If a family member gifts a property, FBR treats the gift recipient’s acquisition cost as the FBR-notified value on the gift date. When the recipient sells, CGT applies on the Gain from that acquisition cost forward. Section 236K still applies to whoever receives the property next in any future sale.
Scenario 3
Power of Attorney (POA) transfers FBR treats certain POA transactions as taxable transfers and collects 236C and 236K accordingly. Buyers and sellers attempting to avoid property taxes through POA arrangements now face FBR scrutiny, and most registering authorities require proper tax payment even on POA-based transfers.
Scenario 4
New construction/builder property. For plots purchased from CDA, DHA, or housing societies and sold for the first time, the same structure applies: the buyer pays 236K, the seller pays 236C, and CGT is payable. Developers selling commercial or residential units face separate provincial sales tax on services obligations, in addition to federal income tax.
Section 7E: The Annual Tax Sellers Must Clear Before Transfer
No registering authority completes a property transfer until the seller produces a valid Section 7E clearance certificate (Form A). FBR requires this certificate for all immovable property transfers, even for properties that qualify for exemption.
Section 7E treats any property with an FBR-notified fair market value above Rs. 25 million as generating a deemed income of 5% of its value annually. FBR taxes that deem income at 20% effectively amount to 1% of the property value per year.
Conclusion
The answer to who will pay gain tax on property in Pakistan is clear: the seller bears the gain tax directly through CGT and also carries the Section 236C withholding obligation. The buyer carries Section 236K as a separate advance income tax as their own direct obligation. Both parties pay, both pay different taxes, and both pay amounts that vary dramatically based on filer status.
Understanding the full picture of the tax on sale of property in Pakistan gain tax on sale of property, withholding tax on sale of property in Pakistan, buyer tax on property, and seller tax on property, gives every investor the foundation to plan deals accurately, avoid surprises at the registry office, and take the steps needed to reduce their tax cost before the deal closes. For more information, please contact Estate Land Marketing.