I bought my property before 1 July 2024. Is capital gains tax still zero after six years?

What does the law say?

Section 37(1A) of the Income Tax Ordinance, 2001 says the gain on disposal of immovable property in Pakistan is taxed under the head “Capital Gains” at the rates in Division VIII of Part I of the First Schedule. The gain itself is worked out under section 37(2): the consideration received (A) minus the cost of the property (B).

Division VIII, as it stands in the text amended to 30 June 2026, is one table with two sets of columns. Property acquired on or before 30 June 2024 is taxed by how long it was held and by type: open plot, constructed property or flat. Property acquired on or after 1 July 2024 has no holding period relief at all. The Finance Act, 2026 did not change this Division, so the same table applies to sales in tax year 2027 (1 July 2026 to 30 June 2027).

For property acquired on or before 30 June 2024, the rates are:

Holding period	Open plots	Constructed property	Flats
Does not exceed one year	15%	15%	15%
Exceeds one year, not two years	12.5%	10%	7.5%
Exceeds two years, not three years	10%	7.5%	0
Exceeds three years, not four years	7.5%	5%	-
Exceeds four years, not five years	5%	0	-
Exceeds five years, not six years	2.5%	-	-
Exceeds six years	0%	-	-

So the answer to “zero after six years” depends on what you own. An open plot needs more than six years. A constructed property is at 0 once it has been held for more than four years, and a flat once it has been held for more than two years. A dash in the table means the property has already reached 0 in an earlier row.

How does it work in practice?

The rate for older property does not depend on whether the seller is on the Active Taxpayers’ List. That distinction appears only in the column for property acquired from 1 July 2024, which charges 15% to persons on the list and the normal income tax rates (with a 15% floor for individuals and associations of persons) to those who are not.

Separately, when the sale is registered, recorded or attested, section 236C requires the authority to collect advance tax from the seller. Division X of Part IV of the First Schedule sets this at 2.75% of the gross amount of the consideration received. Section 236C(2) makes it adjustable, so it counts against the seller’s income tax for the year rather than being a separate charge. It is still collected even where the capital gain falls in a 0% row.

There is also a reduction for one group of sellers. Clause (9A) of Part III of the Second Schedule reduces the capital gains tax by fifty percent on the first sale of property acquired or allotted to ex-servicemen and serving personnel of the Armed Forces, or ex-employees and serving personnel of the Federal and Provincial Governments, who are original allottees certified by the allotment authority. Its proviso raises the reduction to seventy-five percent for gains arising after three years from acquisition.

Worked example (illustrative figures)

Bilal bought an open plot in a Lahore housing scheme in March 2021 for Rs. 4,000,000 and paid Rs. 100,000 in incidental buying costs. He sells it in October 2026 for Rs. 9,000,000 and pays Rs. 50,000 in selling costs. Assume Rs. 9,000,000 is not below the notified value.

1. Holding period. March 2021 to October 2026 is about five years and seven months. That falls in the row “exceeds five years, not six years”, so the open plot rate is 2.5%.
2. Gain. Rs. 9,000,000 - (Rs. 4,000,000 + Rs. 100,000 + Rs. 50,000) = Rs. 9,000,000 - Rs. 4,150,000 = Rs. 4,850,000.
3. Capital gains tax. 2.5% of Rs. 4,850,000 = Rs. 121,250.
4. Advance tax at transfer. 2.75% of Rs. 9,000,000 = Rs. 247,500, collected under section 236C and adjustable against his tax for tax year 2027.

If Bilal waited until after March 2027, the holding period would exceed six years and the rate would be 0%. If the same asset had been a house acquired in March 2021, it would already be at 0, because a constructed property reaches 0 after four years.

What if the property changes type while I hold it?

Division VIII does not define “open plot”, “constructed property” or “flat”, and it has no separate columns for residential and commercial property. A shop, office or house can only be placed in one of the three existing columns. The text does not say which column applies to a plot on which construction was later completed, or to a shop or office unit in a multi-storey building. This page does not settle those points.

What if I do not know my exact holding period?

For immovable property, the Ordinance does not give a separate definition of “holding period” in section 37 or Division VIII. The table only measures whether the period “exceeds” or “does not exceed” a number of years. Where the dates are close to a boundary, the acquisition and disposal dates on the title documents matter, and the law text does not say which document fixes them.

Common mistakes

• Assuming every property now pays 15%. The flat 15% rate for filers applies only to property acquired on or after 1 July 2024. Older property follows the holding period columns.
• Applying the six-year rule to a house or flat. Six years is the open plot threshold. Constructed property and flats reach 0 sooner.
• Thinking 0% means no tax is collected at registration. Section 236C advance tax is collected on the transfer regardless of holding period.
• Forgetting that “exceeds” means more than. A plot held for exactly six years is still in the 2.5% row; the 0% row starts once six years is exceeded.

What to check in the official text

Read section 37(1A) and (2), then Division VIII of Part I of the First Schedule in the official PDF, where the table is laid out in columns (3) to (6). For the advance tax, read section 236C and Division X of Part IV of the First Schedule. Original allottees should also read clause (9A) of Part III of the Second Schedule. Cost and consideration are covered on the page about calculating the gain.