Islamabad, May 12, 2025: The federal government is preparing to announce significant tax relief for Pakistan’s real estate sector in the upcoming federal budget for 2025–26.
These measures, expected to take effect from July 1, 2025, aim to encourage property transactions and reduce the overall tax burden on investors and developers.
Sources familiar with the matter told Business Recorder that one of the key changes would involve revising the Capital Gains Tax (CGT), which is currently applied under Section 37 of the Income Tax Ordinance 2001.
The CGT, payable by sellers when submitting their income tax returns, is likely to be adjusted to reflect the impact of inflation and the rising cost of property.
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In a further boost to the sector, the Federal Excise Duty (FED) on immovable properties is expected to be completely abolished.
Officials have also proposed a cut in the 3% withholding tax under Section 236C, which is presently charged on property sellers. The move is intended to ease the cost of transactions and make real estate investment more attractive.
In addition to the property-specific changes, the government is considering a wider revision of withholding taxes across multiple sectors.
This may include reduced rates on imports of raw materials and other transactions that do not directly generate income.
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However, sources said taxes on income-generating activities, such as dividends, would remain unchanged.
The reforms are part of a broader fiscal strategy designed to promote investment and streamline tax compliance.
Officials believe these changes could provide a much-needed boost to the property market and improve investor confidence.
More detailed information on the proposed tax adjustments is expected to be outlined in the formal budget announcement scheduled later this year.
Economists and stakeholders are watching closely to assess the full impact on both the real estate industry and the wider economy.
