Islamabad, Jan 11: In a significant move aimed at easing the burden on first-time homebuyers, Federal Board of Revenue (FBR) Chairman Rashid Mahmood has agreed in principle to reduce withholding taxes on property sales and purchases. The decision also includes revisiting the 5% Federal Excise Duty (FED) on property transactions to stimulate the housing sector and promote affordable housing schemes across the country.
The proposal was discussed during a meeting of the Taxation Working Group of the Task Force for Housing Sector Development, chaired by the FBR chairman. The meeting addressed growing concerns from stakeholders in the real estate sector about the high transaction taxes that currently stand at 13% per transaction. These taxes include a 4% withholding tax, a 5% FED, and a 4% provincial stamp duty, which stakeholders argue have significantly hindered property sales, especially for first-time buyers.
Chairman Mahmood assured the meeting participants that the FBR is committed to rationalizing taxes, but emphasized that cooperation from provincial governments is essential to maintain the tax levels on real estate transactions. One of the key proposals to streamline the tax system includes an online verification system for non-resident property buyers in collaboration with NADRA. This initiative aims to reduce dependency on field offices and make the verification process more efficient.
While tax reduction measures are on the table, Rashid Mahmood made it clear that non-filers would not be given any concessions, reinforcing the government’s stance on ensuring proper tax compliance.
A committee, led by the FBR Member (Policy) and comprising representatives from the real estate and housing sectors, has been formed to review the existing tax structure and propose new reforms. The committee will focus on aligning property valuation rates with market values, conducting annual reviews, and introducing a more transparent and robust valuation mechanism in collaboration with the Inland Revenue Operations.
During the discussions, concerns were also raised about the impact of income tax on deemed income under Section 7E of the Income Tax Ordinance, particularly regarding its effect on idle and undeveloped plots. The FBR Chairman agreed to review these concerns and suggested that the inconsistencies in the tax design would be addressed in due course.
Real estate stakeholders are hopeful that the upcoming incentive package, expected to be finalized by February 2025, will bring significant reforms to the sector, easing the burden on homebuyers and boosting the overall housing market.
These tax reforms, if implemented, could mark a turning point in the housing sector, providing much-needed relief to property buyers and promoting the growth of affordable housing schemes across Pakistan.
