The federal government is expected to withdraw the Federal Excise Duty (FED) on the transfer of plots and commercial properties under the Finance Act 2024 due to low revenue collection in the first half of the fiscal year. The Federal Board of Revenue (FBR) is likely to propose abolishing the FED on allotments and transfers of residential and commercial properties, with implementation expected in the 2025-26 budget.
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Current FED Structure
At present, developers and builders must collect FED at rates ranging from 3% to 7%, depending on the buyer’s tax status. However, due to the lack of a proper monitoring system, the tax measure has not been fully effective.
- 3% FED applies if the buyer is on the active taxpayers’ list.
- 5% FED applies if the buyer has not filed an income tax return.
- 7% FED applies if the buyer is not on the active taxpayers’ list.
Potential Tax Reforms in Real Estate
The government is also considering reducing transaction taxes on buying and selling immovable properties. The Taskforce on Housing Sector Development has recommended:
- Eliminating Capital Value Tax (CVT) in Islamabad.
- Rationalizing stamp duties across provinces.
- Providing tax exemptions for real estate investments up to Rs. 50 million.
These measures aim to boost real estate investments, streamline taxation, and enhance market transparency.
