Tax relief on sale of property: Chairman FBR announced major deductions.
In a major move, Federal Board of Revenue (FBR) Chairman Rashid Mehmood has announced major tax reforms aimed at reviving Pakistan’s real estate market through tax relief on property sales. These include plans to reduce the withholding tax on property transactions and revise the 5% Federal Excise Duty (FED) on property sales, a move aimed at first-time home buyers and affordable housing schemes. It promises much-needed relief.
Important Decisions to Encourage Housing Sector – Tax relief on sale of property
The announcement was made during a meeting of the Taxation Task Force for Housing Sector Development. Here’s a detailed look at the results of the session:
1. Reduction of withholding tax
The current tax on property transactions is 13% (4% sale/purchase, 5% FED, and 4% provincial stamp duty). The FBR chairman agreed in principle to reduce these taxes, provided the provincial authorities commit to maintaining their current rates.
2. Revision of 5% Federal Excise Duty (FED).
High FED on property transaction is a deterrent for many buyers. FBR intends to revise this tax to encourage transaction volume and affordability.
3. Strict measures against non-filers
Taking a lenient approach to tax relief, the FBR is firm on non-filers, denying any concessions. For non-residents, an online verification process is being developed in collaboration with NADRA to facilitate tax compliance.
Formation of Special Committee Tax relief on sale of property
A special committee has been set up to rationalize transaction tax at both the federal and provincial levels. Members include industry leaders and policy makers:
- Good country (Real Estate Analyst)
- Sardar Tahir Mahmood (President, Federation of Realtors, Pakistan)
- Major General Aamir Aslam (Chairman, NAPHDA)
- Hafiz Mian Noman (Ex-MPA)
- Wasim Hayat Bajwa (DDG Policy and Planning Wing, MoH&W)
Aligning property valuations with market values
One of the most important reforms is to align property assessment rates with market values. The initiative, which will be reviewed annually, aims to increase transparency and ensure fair taxation.
Addressing Section 7E and other concerns
Considerations regarding Section 7E which imposes income tax on deemed income were also discussed. The FBR chairman agreed to review its impact on undeveloped plots and possible double taxation, setting up a joint committee to iron out the discrepancies.
DNFBPs Directorate for Transparency Expanded
The Directorate General of Designated Non-Financial Businesses and Professions (DNFBPs) will get additional resources including manpower, funding and digital tools to improve transparency in the real estate sector.
Optimistic around February 2025 incentive package
Real estate analyst Ahsan Malik expressed optimism about an upcoming stimulus package, expected in February 2025. The package is expected to provide benefits to first-time home buyers and boost affordable housing schemes across the country.
The result
FBR’s proactive approach to reducing taxes and addressing real estate concerns is a major step towards revitalizing Pakistan’s housing sector. These reforms are expected to reduce financial barriers for buyers, stimulate market activity and promote affordable housing for all.
Stay tuned for updates on the February 2025 incentive package and more insights into Pakistan’s evolving real estate landscape.
Reference: https://www.brecorder.com/news/40342196
