Property Tax is levied on commercial and residential buildings and land by the provincial governments of Pakistan. The Excise & Taxation (E&T) Departments of the provincial governments draft Valuation Tables regularly, which provide certain figures based on different measures for each province, and sometimes for different cities within a province. These tables use more or less the same formula in every province to calculate annual value (more on this later) but in different ways. Within the blog, you can also find links where you can calculate property taxes using formula in detail.
Take a look at the Residential Property Valuation Table released by the E&T Department of Punjab below, for example.
RESIDENTIAL
CATEGORY RENTED SELF-OCCUPIED
RATE OF LAND SQ. YD. (IN PKR) RATE OF COVERED AREA IN SQ. FT. (IN PKR) RATE OF LAND SQ. YD. (IN PKR) RATE OF COVERED AREA IN SQ. FT. (IN PKR)
Up to 500 Exceeding 500 Up to 3,000 Exceeding 3,000 Up to 500 Exceeding 500 Up to 3,000 Exceeding 3,000
A 23 18.4 23 18.4 4.6 3.68 4.6 3.68
B 17 13.6 17 13.6 3.4 2.72 3.4 2.72
C 14 11.2 14 11.2 2.8 2.24 2.8 2.24
D 11 8.8 11 8.8 2.2 1.76 2.2 1.76
E 8.2 6.56 8.2 6.56 1.64 1.31 1.64 1.31
F 6.5 5.2 6.5 5.2 1.3 1.04 1.3 1.04
G 4 3.2 4 3.2 0.8 0.64 0.8 0.64
This table seems difficult to understand. Determining property tax rates in Pakistan seems really complicated because there appears to be a lot of calculation and legal jargon involved. They are not nearly as complex in reality, though. So take a deep breath and let us walk you through this table step by step.
DETERMINING THE TAX AMOUNT
Property tax is levied on the annual value of land and buildings. In Punjab, for example, the tax is levied at the rate of 5% of the annual value. Simply put, the annual value of a property is the estimated amount the property would fetch if rented out for a year (12 calendar months). Calculating the annual value is the only tricky bit in all of this. Once we have this value, calculating the tax is a breeze.
Other provinces use different rates. The Sindh government, for example, taxes properties at the rate of 25% of annual value. This seems huge when compared to the rates in Punjab, but the prices set in the valuation table, to calculate annual values issued by the Sindh E&T Department, are comparatively lower, so the final tax amount that you have to pay comes roughly within the same bracket.
The numbers provided to calculate the annual value of a property vary from category to category and from size to size, as well as depending on whether it has been rented out or is occupied by the owner in case of Punjab.
To begin with, if you don’t already know it, you may have to find the category in the valuation table for the area where you have your property.
Once you have the category, annual value is calculated in four steps:
i) (Total Land Area of a Property) x (Per square yard Rent Prescribed in Valuation Table) = A
ii) (Total Covered Area of a Property) x (Per square footRent Prescribed in Valuation Table) = B
iii) (A + 😎 x 12 = Gross Annual Rental Value (GARV)
iv) GARV – 10% of GARV = Annual Rental Value (or annual value)
RESIDENTIAL
The Valuation Table above gives us all the necessary information to calculate the tax, so using it, let’s calculate the property tax for a single-storey 1-kanal (500 square yard) home in a Category A area in Lahore rented out to a tenant, just as an example.
One kanal or 500 square yard is equal to 4,500 square foot. Let’s say the covered area in this home is 3,350 square foot. So according to the table, land of this size in Category A would fetch PKR 23 per square yard in rent every month, and the house built on it would fetch PKR 23 per square foot for 3,000 square foot and PKR 18.40 per square foot for the remaining 350 ft2 in rent per month.
We know the land area for this house is 500 yard2 and the covered area is 3,350 ft2. Going by the steps above, the calculation would be:
i) 500 x 23 = 11,500
ii) (3,000 x 23)+ (350 x 18.40) = 75,440
iii) (11,500 + 75,440) x 12 = 1,043,280
iv) 1,043,280 – 104,328 = 938,952
There you have it. PKR 938,952 is the annual value for the house we chose as an example. Since the Punjab government taxes property at 5% of annual value, the tax due would be:
0.05 x 938,952 = PKR 46,948
This number might vary slightly if the E&T Department in question taxes covered area and open land using separate metrics (as it usually does, which involves separate slab of rent rate being applied on vacant land and covered area). Nevertheless, the ballpark figure you will get with this calculation should be fairly close to the real tax sum.
COMMERCIAL
When it comes to commercial property, the Punjab government’s valuation tables now also distinguish between ‘Main’ and ‘Off’ properties within a category. This refers to the location of the commercial property, whether it lies on a main road or an off road. A main road is defined as a road with the width of 30 feet or more.
Please take a look at the Commercial Property Valuation Table issued in 2014 by the E&T Department of the Punjab government:
COMMERCIAL
CATEGORY RENTED SELF-OCCUPIED
RATE OF LAND SQ. YD. (IN PKR) RATE OF COVERED AREA IN SQ. FT. (IN PKR) RATE OF LAND SQ. YD. (IN PKR) RATE OF COVERED AREA IN SQ. FT. (IN PKR)
Up to 500 Exceeding 500 Up to 3,000 Exceeding 3,000 Up to 500 Exceeding 500 Up to 3,000 Exceeding 3,000
A Main 120 96 120 96 24 19.2 24 19.2
Off 96 76.8 96 76.8 19.2 15.36 19.2 15.36
B Main 80 64 80 64 16 12.8 16 12.8
Off 64 51.2 64 51.2 12.8 10.24 12.8 10.24
C Main 56 44.8 56 44.8 11.2 8.96 11.2 8.96
Off 44.8 35.8 44.8 35.8 8.96 7.17 8.96 7.17
D Main 40 32 40 32 8 6.4 8 6.4
Off 32 25.6 32 25.6 6.4 5.12 6.4 5.12
E Main 30 24 30 24 6 4.8 6 4.8
Off 24 19.2 24 19.2 4.8 3.84 4.8 3.84
F Main 20 16 20 16 4 3.2 4 3.2
Off 16 12.8 16 12.8 3.2 2.56 3.2 2.56
G Main 15 12 15 12 3 2.4 3 2.4
Off 12 9.6 12 9.6 2.4 1.92 2.4 1.92
Now, before you get freaked out by the seemingly increased complexity of this table, let me tell you that everything is practically the same as the residential table, the only difference being the ‘Main’ and ‘Off’ provisions. Let’s do another hypothetical calculation so we can get a better idea of commercial property tax rates in Pakistan. The formula is the same as before.
Let’s say for example that you have a 100 sq yd shop on an “off road” commercial area that falls within Category B, which you are occupying yourself. Using the table above, you can calculate the annual value as follows:
i) 100 x 12.8 = 1,280
ii) 900 x 12.8 = 11,520
iii) (1,280 + 11,520) x 12 = 153,600
iv) 153,600 – 15,360 = 138,240
According to this calculation, the annual value for such a shop will be PKR 138,240. The property tax due would therefore be:
0.05 x 138,240 = PKR 6,912
VALUATION TABLES AND OTHER DETAILS
Valuation Tables and/or tax details for the provinces can be accessed through the links below:
Excise & Taxation Department, Government of Punjab
Excise, Taxation & Narcotics Department, Government of Sindh
Excise Department, Government of Khyber Pakhtunkhwa
Excise & Taxation Department, Government of Balochistan
REBATES & EXEMPTIONS
Rebates are incentives that the provincial governments provide to taxpayers at their discretion. For instance, the Punjab government gives a rebate equalling 5% of the tax amount for paying the tax in time and in lump sum. This ensures timely and efficient tax collection.
All provinces declare specific properties which are exempted from paying property tax. These exemptions vary from province to province, and details can be found in the links we’ve provided above. As an example, the Punjab government does not tax properties whose annual value is less than PKR 4,320, or buildings owned by widows, minor orphans and/or disabled persons if they meet certain criteria.
(Source Zameen.com)
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