The federal government is expected to unveil significant tax relief measures for the real estate sector in the upcoming federal budget 2025–26. The reforms, which will come into effect on July 1, 2025, are designed to stimulate property investment by easing the tax burden on transactions.
Sources cited by Business Recorder have indicated that one major change will involve revising the Capital Gains Tax (CGT). Currently applied under Section 37 of the Income Tax Ordinance 2001, this tax is paid by property sellers when filing their income tax returns. With inflation and property prices on the rise, officials are reported to be considering adjustments that better reflect current market conditions.
In addition, it is believed that the government will abolish the Federal Excise Duty (FED) on immovable properties altogether. This move, if confirmed, would remove a longstanding tax on property sales. Furthermore, the existing 3% withholding tax imposed on property sellers under Section 236C is also expected to be reduced, a measure intended to encourage more real estate transactions in a slowing market.
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Broader reforms are reportedly in the pipeline as well. Officials have hinted at plans to rationalize withholding taxes across various sectors. For instance, rates on imports of raw materials and other non-income generating financial transactions are likely to see a reduction. However, withholding taxes on income-based sources such as dividends are expected to remain unchanged.
These tax reforms are part of a wider fiscal strategy aimed at boosting investment in the real estate market while reducing the overall compliance burden on businesses and individuals. Detailed plans and further policy guidelines are anticipated to be included in the official budget announcement. Analysts suggest that the proposed measures could provide the sector with a much-needed stimulus, supporting economic growth in a challenging environment.