What the new 15% capital gains tax means for landowners partnering with developers
The policy design means that citizens who hold inherited land, or property acquired many years ago at very low rates, will face a comparatively higher tax burden
Landowners entering into joint-venture agreements with real estate developers are set to face a structured 15% capital gains tax on the value of apartments or any non-cash benefits they receive, a major departure from the existing tax framework.
The calculation mechanism, detailed in the income tax provisions of the newly proposed Finance Bill presented by Finance Minister Amir Khosru Mahmud Chowdhury, aims to broaden the national capital gains tax base.
While the existing system levies a 15% capital gains tax on the initial cash signing money received by a landowner, the new proposal brings the allocated apartments – which were previously exempt from this – directly into the tax net.
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According to the National Board of Revenue (NBR), the tax liability will be determined by assessing the official government valuation of the received properties and deducting the original cost of land.
Specifically, apartments handed over to a landowner in exchange for their property will be valued using the government-assessed mouza value established for that specific area.
The initial acquisition cost of the land will then be subtracted from this total mouza value, and the remaining amount will be treated as taxable capital gains subject to the 15% rate.
To illustrate how the mechanism will work, a senior NBR official outlined a scenario to The Business Standard involving a landowner who purchased a 10-katha plot for Tk50 lakh two decades ago.
If this owner signs a deal with a developer, receiving Tk50 lakh as cash signing money alongside an allotment of 10 apartments in a 20-unit building project, their tax will be calculated using the official rates.
If the government-assessed mouza value for each of the allocated apartments is Tk50 lakh, the combined value of the 10 flats will stand at Tk5 crore.
When the Tk50 lakh signing money is added, the landowner's total proceeds from the development deal reach Tk5.5 crore.
The NBR will then deduct the original land acquisition cost of Tk50 lakh from the total proceeds, leaving a net taxable gain of Tk5 crore.
Applying the 15% rate to this amount results in a final capital gains tax liability of Tk75 lakh for the landowner.
The NBR official said individual tax liabilities will vary significantly across the country based on geographical location, local land valuations, and individual property acquisition histories.
The policy design means that citizens who hold inherited land, or property acquired many years ago at very low rates, will face a comparatively higher tax burden.
This is because their original acquisition cost is small, which automatically inflates the size of the remaining taxable gain.
These government-assessed mouza values for both land and apartments are periodically updated by the relevant valuation committee.
