Islamabad: Federal Excise Duty on Property Transfers Likely to Be Abolished
The federal government is planning to eliminate the Federal Excise Duty (FED) on the transfer of plots and commercial properties to stimulate real estate activity. According to sources, the tax, introduced through the Finance Act 2024, has failed to generate significant revenue in the first half of the 2024-25 fiscal year. As a result, the Federal Board of Revenue (FBR) has proposed its withdrawal.
Current FED Tax Structure
The Federal Excise Duty (FED) currently applies at different rates based on the buyer’s tax status:
- 3% of the property’s value if the buyer is on the Active Taxpayers’ List (ATL).
- 5% if the buyer has filed an income tax return but is not on the ATL.
- 7% if the buyer has neither filed a return nor appears on the ATL.
Under current regulations, developers and builders are responsible for collecting and depositing this duty. However, due to weak monitoring mechanisms, there is no assurance that the collected amounts actually reach the national treasury, contributing to the FED’s failure in achieving its revenue targets.
Taskforce Proposes Key Real Estate Tax Reforms
To further boost real estate investment in Pakistan, a special taskforce has recommended additional tax reforms, including:
✅ Abolition of Section 7E of the Income Tax Ordinance – This tax currently imposes deemed income tax on immovable property, making real estate ownership more expensive. ✅ Eliminating Capital Value Tax (CVT) on property transactions in Islamabad to reduce the overall cost of property transfers. ✅ Standardizing stamp duty rates across all provinces and the Islamabad Capital Territory (ICT) for a uniform taxation policy. ✅ Nationwide tax standardization through the National Tax Council to prevent regional disparities in property taxation. ✅ Allowing a wealth reconciliation waiver for real estate investments up to Rs. 50 million, making it easier for investors to declare their assets.
📌 Related Read: Real Estate Taxation Updates: What Investors Need to Know
Impact on the Real Estate Market
Lowering Transaction Costs & Encouraging Investment
Real estate experts believe that removing FED and reducing transaction taxes will make property investment more accessible and attractive. If these measures are approved, the upcoming federal budget will likely include the elimination of FED, leading to:
🔹 Increased real estate transactions as buying and selling become more affordable. 🔹 A surge in construction projects, boosting job opportunities in Pakistan’s real estate sector. 🔹 Higher investor confidence, particularly among overseas Pakistanis looking to invest in the local market.
Ensuring Developer Accountability
To further protect buyers and investors, experts suggest the government should:
✔ Impose penalties on property developers for delays in handing over properties. ✔ Mandate escrow accounts for all property transactions to prevent financial mismanagement and protect public investments. ✔ Strengthen regulatory oversight on builders and developers to ensure timely project completion.
If the government finalizes the FED withdrawal proposal, it will be a historic win for the real estate sector. Combined with reduced transaction taxes, these measures will make property investment in Pakistan more attractive, encouraging both local and international investors.
🚀 Stay updated with the latest real estate news and investment opportunities at PropertiesPakistan.com.
