Understanding Property Tax Rates in Pakistan

For every one of us who owns property in Pakistan, the time of the year when property taxes are due is always accompanied by some measure of apprehension. Taxes are often difficult to make head or tail of, and it is more than understandable if you are a little freaked out. But rest assured, this blog is here to help!

Property Tax is levied on both commercial and residential buildings and land by the provincial governments of Pakistan. The Excise & Taxation (E&T) Departments of the provincial governments release 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 formulae in every province to calculate something called annual value (more on this later) but in different ways. Within the blog, you can also find links where you can explore each province’s formulae in detail.

Take a look at the Residential Property Valuation Table released in 2014 by the E&T Department of the Punjab government 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

At first look, this table seems difficult to understand and plenty confusing. Property Tax 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 prescribed figures to calculate annual values issued by the Sindh E&T Department are correspondingly lower, so the final tax amount 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 the case of Punjab.

To begin with, if you don’t already know it, you may have to find the category in the valuation table above for the area where your property is situated. You can find your area category for Property Tax here.

Once you have the category, annual value is calculated in four steps:

i)     (Total Land Area of a Property) x (Per Yard² Rent Prescribed in Valuation Table) = A

ii)    (Total Covered Area of a Property) x (Per Foot² Rent Prescribed in Valuation Table) = B

iii)  (A + B) 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 yard²) home in a Category A area in Lahore rented out to a tenant, just as an example.

One kanal or 500 yard² is equal to 4,500 ft². Let’s say the covered area in this home is 3,350 ft². 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 ft² 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 does usually, 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 the rates at which commercial properties are taxed. The formula is the same as before.

Let’s say for example that you have a 100 yard² (900 ft²) shop in 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 (before September 30^th) and in lump sum. This ensures timely and efficient tax collection.

All provinces declare specific properties exempt 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.

I hope this detailed explanation of property taxes will help you keep calm when you receive your next tax challan. If you have any questions – which I’m sure you do given the large amount of arithmetic in this post – please don’t hesitate to ask in the comments section below.

Disclaimer: The valuation rates used as examples in this post were taken from the Punjab Excise & Taxation Department’s website. While we tried our best to ensure the figures are up to date, we cannot guarantee their accuracy. The examples are intended to be only a guide for readers, so please contact the relevant authorities for up-to-date tax figures in your province.