Sources cited by ProPakistani suggest that the International Monetary Fund (IMF) has agreed with the federal government on reducing taxes in Pakistan’s real estate sector, marking a notable shift from earlier discussions where the Fund had raised concerns over potential revenue losses.
The move comes as part of ongoing preparations for the Budget 2026–27, where the government has been pushing for relief in property transaction taxes to revive activity in the real estate and construction sectors.
Earlier IMF concerns
Previously, the IMF had reportedly objected to proposed tax cuts, warning that reduced rates could affect government revenue collection. However, recent discussions indicate a possible softening of that stance.
Proposed tax reductions
Under the government’s earlier proposals, significant reductions were planned in withholding taxes on property transactions:
- Section 236K (property purchase):
- Proposal: Reduce from 1.5% to 0.25% for filers
- Section 236C (property sale):
- Proposal: Reduce from 4.5% to 1.5% for filers
Current tax structure
Under existing Federal Board of Revenue (FBR) rules:
- Buyers (Section 236K):
- Filers: 1.5% to 2.5% (based on property value slabs)
- Late filers: 4.5% to 6.5%
- Non-filers: 10.5% to 18.5%
- Sellers (Section 236C):
- Filers: 4.5% to 5.5%
- Late filers: 7.5% to 9.5%
- Non-filers: 11.5%
These taxes are collected as advance income tax at the time of property transfer, while capital gains tax is settled separately during annual filing.
Policy rationale
Officials believe that lowering transaction taxes could help stimulate activity in the real estate sector, which has slowed due to high costs and reduced demand. A revival in property transactions is also expected to benefit allied industries such as cement, steel, construction, transport, and financial services.
The government also sees the potential for increased participation from overseas Pakistanis if transaction costs are reduced.
Final decision pending budget
The final structure of the tax relief is expected to be outlined in the Budget 2026–27, including whether reductions will apply only to filers or extend to late filers and non-filers as well.
