Real estate transactions in Pakistan often attract capital gains tax under the Income Tax Ordinance, 2001. However, recognizing the contributions of Armed Forces personnel and public servants, the law provides a special relief under Clause (9A) of Part III of the Second Schedule — reducing the tax burden on the first sale of immovable property allotted to such individuals.
This clause ensures equitable treatment for those who have served the nation and facilitates the lawful transfer of property with a 50% to 75% reduction in tax liability, depending on the holding period.
Legal Provision — Clause (9A)
“The amount of tax payable on income chargeable under the head ‘Capital Gains’ on disposal of immovable property shall be reduced by fifty percent on the first sale of immovable property acquired or allotted to ex-servicemen and serving personnel of Armed Forces or ex-employees or serving personnel of Federal and Provincial Governments, being original allottees of the immovable property, duly certified by the allotment authority.”
Provided further that for capital gains arising after completion of three years from the date of acquisition, the amount of tax payable shall be reduced by seventy-five percent.
Scope of Applicability
Eligible Persons:
Ex-servicemen and serving personnel of the Armed Forces;
Ex-employees or serving personnel of Federal and Provincial Governments;
Must be original allottees of the immovable property;
Must possess certification from the allotment authority confirming original ownership.
Eligible Property:
Only immovable property (land, house, flat, or plot) allotted under an official or departmental allotment scheme.
Applies to first sale by the original allottee only — not to subsequent purchasers.
Extent of Tax Reduction
| Holding Period | Reduction in Capital Gains Tax |
|---|---|
| First Sale (immediate disposal) | 50% of tax payable |
| If sold after 3 years of acquisition | 75% of tax payable |
Thus, longer retention of property attracts higher tax relief, encouraging stability in property ownership.
Example of Computation
Mr. Ahmed, a retired army officer, sells his allotted residential plot after 4 years for PKR 10 million, with a capital gain of PKR 2 million.
Assuming a standard tax rate of 10%, the payable tax is:
2,000,000×10%=200,0002,000,000 × 10% = 200,000
Under Clause (9A), since the property is sold after 3 years:
200,000×25%=PKR50,000200,000 × 25% = PKR 50,000
Therefore, tax payable is reduced by 75%, and Mr. Ahmed pays only PKR 50,000.
Purpose and Legislative Intent
The Government introduced Clause (9A) to:
Recognize and reward national service by ex-servicemen and public employees;
Provide social and financial support during post-service life;
Encourage transparent and documented real estate transactions; and
Promote property retention by discouraging speculative trading.
Documentation Required to Claim Relief
To claim the reduction, the taxpayer must retain:
Allotment letter issued by the relevant authority (Army Housing, FGEHF, CDA, LDA, etc.);
Certificate of original allottee duly verified;
Proof of acquisition date and sale deed;
Tax computation or challan showing adjusted capital gains.
Treatment in Tax Return (IRIS)
The taxpayer must:
Report capital gain under “Income from Capital Gains — Immovable Property.”
Select the applicable reduction clause (9A).
Attach or upload supporting certification from the allotting authority.
Ensure the property is not sold previously — benefit is for first sale only.
Conditions for Denial of Relief
The FBR may disallow the claim if:
The seller is not the original allottee;
The property was acquired through secondary purchase;
The sale was not declared in the return of income;
Required documentation is not furnished during verification.
Clause (9A) reflects Pakistan’s commitment to supporting ex-servicemen, soldiers, and government employees by reducing their capital gains tax liability on the first sale of immovable property.
This provision encourages transparency and acknowledges public service through tangible financial relief.
At Tanweer Habib & Co., we assist retired personnel and government employees in verifying eligibility, computing accurate tax reductions, and filing compliant returns to lawfully avail this concession under the Income Tax Ordinance, 2001.
FAQs on Clause (9A) Capital Gains Tax Reduction
1. What is Clause (9A) of the Second Schedule?
It provides 50% to 75% reduction in capital gains tax on the first sale of immovable property allotted to ex-servicemen and government employees.
2. Who qualifies for this relief?
Ex-servicemen, serving Armed Forces personnel, and serving or retired Federal and Provincial Government employees.
3. Is this benefit available to civilians?
Only if they are current or former government employees or allottees under official schemes.
4. What is the minimum holding period for 75% reduction?
If the property is sold after 3 years of acquisition, the reduction increases to 75%.
5. Does this apply to all types of property?
Only to immovable property (plots, flats, or houses) allotted under government or institutional schemes.
6. Can the benefit be claimed by a purchaser who buys from an allottee?
No, it is available only to the original allottee — the first owner.
7. How much is the reduction if sold within three years?
The taxpayer enjoys a 50% reduction in tax payable on capital gains.
8. What is meant by “first sale”?
The initial transfer of property by the original allottee who received the allotment certificate.
9. Does the property have to be residential?
Not necessarily — it can be any immovable property allotted under an official or departmental scheme.
10. Is this reduction treated as an exemption?
No, it is a partial reduction, not a full exemption — tax still applies but at a lower effective rate.
11. What documentation is required?
Allotment certificate, sale deed, and certification from the relevant allotting authority confirming original allotment.
12. Is this reduction automatic?
No, the taxpayer must claim it while filing the income tax return and attach supporting documents.
13. Does this relief apply to property inherited by heirs?
No, it is applicable only to the original allottee’s first sale.
14. Can this relief be claimed jointly by spouses?
Yes, if the property was jointly allotted and both qualify as original allottees.
15. Is the relief available to non-resident Pakistani ex-servicemen?
Yes, if the property is in Pakistan and was originally allotted to them by a recognized authority.
16. What if the allotment was through a cooperative society?
Only if the society was recognized by a government or armed forces department.
17. How is the three-year holding period calculated?
From the date of acquisition or allotment to the date of registered sale deed.
18. Does this relief apply to multiple properties?
Only to the first sale of each allotted property, if individually allotted.
19. Is there any time limit to claim this reduction?
Yes, it must be claimed in the tax year in which the sale occurs.
20. How can Tanweer Habib & Co. assist?
We help clients verify eligibility, compute the reduced tax, and prepare compliant filings to lawfully claim Clause (9A) benefits under FBR regulations.
