Islamabad, 28 Apr, 2025: Property Taxes have kept growing as an important revenue source for the Federal Board of Revenue (FBR), new figures have revealed a sharp increase in collection figures over the current fiscal year.
Officials said the Withholding Tax (WHT) collected on real estate sales and purchases stood at Rs169 billion between July and March of FY2024-25.
The figure is significantly higher than the Rs136 billion collected during the same period a year ago, they added.
Higher Tax Rates Offset Drop in Activity
For a while the property market continued to see a slowdown, with transactions down 15 percent, but FBR’s revenue from Property Taxes rose 24 percent a result that seems to have been boosted largely by higher tax rates introduced in the current fiscal year which are in effect expected to have offset the decline in transaction volume.
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As reported, changes to the WHT rate on real estate transactions were also the factor for the surge. For FY2024-25, the tax rate on sellers increased from 2 percent to 3 percent for registered filers, and from 4 percent to 6 percent for non-filers.
The WHT on buyers also declined from 2 percent for registered filers and 7. 5 percent for non-filers to 3 percent and 10. 5 percent respectively.
Potential Removal of Excise Duty
In a related development, state government is considering scrapping Federal Excise Duty (FED) on property acquisition and sale.
FED has had a relatively modest impact so far this financial year, leaving policymakers scrambling to decide whether it is working.
State officials close to the matter said scrapping FED would streamline the taxation process and spur more activity in the property market.
READ MORE: FBR increases taxes on late filers
Meanwhile tax data indicates that the burden on salaried has not vanished as laid out in the revenue data. So far in the fiscal year, salaries have already borne Rs370 billion in taxes — more than any other sector property and exports.
Outlook for the Real Estate Sector
The government is set to debate a future strategy for the taxation of real estate at its spring mid-term elections.
But while higher Property Taxes have led to profits on revenues, a more balanced approach in encouraging better productivity in the sector will put emphasis on lowering barriers to trade without impacting state income, experts say.
As the fiscal year comes to an end, policymakers have to balance the resumption of strong tax collection with ways to foster steady real estate investment, and in turn steady economic growth.
