ISLAMABAD: The federal government is reportedly considering a significant reduction in transaction taxes on the real estate sector in the upcoming budget as part of efforts to revive property market activity and improve overall tax collection.
According to official sources, substantial relief is expected for the real estate and construction sectors, which are considered key drivers of employment generation and economic growth.
Sources further revealed that the government has already briefed the International Monetary Fund (IMF) regarding its proposal to lower taxes on property transactions. The move is aimed at stimulating buying and selling activity in the real estate market, which officials believe could ultimately increase tax revenues through higher transaction volumes.
Under the proposed changes, the withholding tax under Section 236K of the Income Tax Ordinance, 2001, on property purchases may be reduced from 1.5% to 0.25%.
Similarly, the withholding tax under Section 236C on property sales is likely to be lowered from 4.5% to 1.5%.
Sources also confirmed that the Federal Board of Revenue (FBR) has already revised property valuation rates downward by 30% to 35% over the past three months in an effort to revive market activity.
However, no relief is expected for non-filers in the upcoming budget, and the existing 10.5% tax rate on property transactions for non-filers is likely to remain unchanged.
Officials pointed to a notable decline in tax revenues due to high taxation rates. During the July–March period of the current fiscal year, withholding tax collection under Section 236K fell by 29% compared to the same period last year.
Similarly, capital gains tax under Section 37A saw a sharp decline, with collections from the 5% and 10% slabs dropping by 68% and 64%, respectively.
Meanwhile, income tax collection on deemed income under Section 7E also recorded a 10% decrease during the same period.
In related commentary, President of the Real Estate Consultants Association (RECA), Muhammad Ahsan Malik, welcomed the government’s focus on the sector, stating that the Prime Minister’s vision to promote real estate development is encouraging.
He noted that the real estate and construction industries collectively support 45 to 55 allied sectors and play a critical role in job creation. According to him, strengthening these sectors could help reduce unemployment and support the government’s target of achieving over 4% economic growth.
