Lahore: In a landmark reform move, the Punjab government has replaced its 66-year-old Annual Rental Value (ARV) system with a Capital Value (CV)-based property tax regime, effective from January 1, 2025. The change is a key component of the Punjab Finance Act, 2024, and is being hailed as a major step toward a more transparent and efficient fiscal structure.
Led by Secretary Excise and Taxation Punjab, Muhammad Masood Mukhtar, the reform aims to eliminate longstanding inefficiencies and subjectivity in the property tax assessment system. Under the ARV model, tax calculations were based on estimated rental income determined by excise inspectors—an approach often criticised for being prone to manipulation and underreporting.
The newly introduced Capital Value-based system shifts the focus to objective, quantifiable factors such as land area and government-notified property rates. This method is designed to reduce discretionary power and improve revenue collection without raising nominal tax rates.
The reform is grounded in research conducted by the Lahore School of Economics, which demonstrated the potential of the CV model to enhance transparency and broaden the tax base. International support from the World Bank, GIZ, and the Sub-National Governance Programme further strengthened the case for transition.
Dr. Ali Cheema, Vice Chancellor of LUMS, also played a key role in shaping the policy, adding academic credibility and strategic depth to the initiative.
To support the transition, the Excise & Taxation Department is digitizing property valuation records and integrating them with the Board of Revenue’s DC rate tables. This process involves reclassification of nearly five million properties and is being overseen by a dedicated IT task force.
The reform package also includes the introduction of a self-assessment system, allowing property owners to file their tax returns online. Low-income households whose properties are valued under Rs5 million will be exempt from taxation under the new structure.
While internal resistance remains, particularly from officials set to lose discretionary powers, the government has introduced performance-based incentives and whistleblower rewards to encourage compliance and accountability.
The sweeping changes aim to modernize property taxation in Punjab, ensuring a more equitable system that fosters voluntary compliance, strengthens governance, and increases provincial revenue in the long term.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
