ISLAMABAD: The federal government is considering major tax relief for the real estate sector in the upcoming budget. The move aims to boost property market activity and increase overall tax revenue.
Officials believe lower taxes will encourage more buying and selling of properties. As a result, tax collection could improve despite the reduced rates. According to reports, the government has shared its proposal with the International Monetary Fund (IMF).
Under the plan, with holding tax on property purchases may drop from 1.5 percent to 0.25 percent. The tax applies under Section 236K of the Income Tax Ordinance, 2001. At the same time, withholding tax on property sales could fall from 4.5 percent to 1.5 percent under Section 236C.
The Federal Board of Revenue (FBR) has already taken steps to support the sector. Over the past three months, it reduced property valuation rates by 30 to 35 percent. Officials hope these measures will help revive real estate and construction activities across the country.
However, the government is not expected to offer any relief to non-filers. The current 10.5 percent tax on property transactions by non-filers is likely to remain unchanged in the new budget.
Officials said high tax rates have hurt tax collection in recent months. During July to March of the current fiscal year, withholding tax collection under Section 236K fell by 29 percent compared with the same period last year.
Capital gains tax collections also recorded sharp declines. Revenue from the 5 percent and 10 percent tax slabs dropped by 68 percent and 64 percent respectively. In addition, income tax collection under Section 7E declined by 10 percent during the same period.
Real Estate Consultants Association (RECA) President Muhammad Ahsan Malik welcomed the government's efforts to support the sector. He said real estate and construction are linked to around 45 to 55 industries. He added that stronger activity in these sectors would create jobs, reduce unemployment and support the government's target of achieving economic growth above four percent.
