ISLAMABAD – June 10, 2025 – In a significant move aimed at stimulating economic activity and boosting the real estate sector, the Federal Government of Pakistan has unveiled substantial tax reductions and incentives for property transactions as part of the Federal Budget for the fiscal year 2025-26. These measures are expected to come into effect from July 1, 2025.
A cornerstone of the new budget proposals is the reduction in withholding tax on property purchases. The rates are proposed to be significantly lowered:
- The existing 4% rate will be reduced to 2.5%.
- The 3.5% rate will be brought down to 2%.
- The 3% rate will be decreased to 1.5%.
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Further relief for the property market includes the proposed abolition of the 7% Federal Excise Duty (FED) currently levied on the first sale or allotment of properties, plots, and houses. This duty, which was introduced in the previous fiscal year, has been a point of contention for real estate stakeholders, and its removal is anticipated to significantly reduce transaction costs.
To encourage homeownership and make housing more accessible, the government has also proposed the introduction of tax credits for buyers of houses up to 10 marlas and flats up to 2000 square feet.
These comprehensive tax adjustments are part of a broader fiscal policy shift designed to invigorate investment across the real estate sector, ease compliance burdens, and make property ownership more affordable for citizens. The proposals have reportedly been discussed and agreed upon in principle with the International Monetary Fund (IMF).
Experts believe these measures will be crucial in revitalizing a key sector that contributes significantly to the national economy and creates numerous allied industry opportunities. The final approval and implementation of these proposals are contingent upon the formal parliamentary approval of the Federal Budget 2025-26.
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