ISLAMABAD: The federal government is considering major property tax reductions in the upcoming Budget 2026-27 as part of a broader strategy to revive Pakistan’s real estate sector, stimulate investment, and increase overall tax revenues.
According to official sources, the proposed measures are aimed at encouraging property transactions and boosting activity in the real estate and construction sectors, which are widely regarded as key drivers of employment and economic growth. The government believes that lowering transaction taxes will increase buying and selling activity, ultimately expanding the tax base and generating higher revenue through greater market participation.
Sources revealed that the government has already informed the International Monetary Fund (IMF) about its proposal to reduce taxes related to property transactions. Under the proposed plan, withholding tax on property purchases under Section 236K of the Income Tax Ordinance, 2001, may be reduced from 1.5 percent to 0.25 percent.
Similarly, withholding tax on property sales under Section 236C is expected to be cut from 4.5 percent to 1.5 percent. These measures are being considered to address the slowdown in the property market and encourage fresh investment in the sector.
Officials said the Federal Board of Revenue (FBR) has already reduced property valuation rates by 30 to 35 percent over the past three months in an effort to support the real estate industry. However, no relief is expected for non-filers, and the existing 10.5 percent tax on property transactions conducted by non-filers is likely to remain unchanged.
Government data indicates that higher tax rates have negatively impacted revenue collection. During the July-March period of the current fiscal year, withholding tax collection under Section 236K declined by 29 percent compared to the same period last year.
In addition, capital gains tax collections under Section 37A witnessed significant declines, with receipts from the 5 percent and 10 percent tax slabs falling by 68 percent and 64 percent, respectively. Tax collection under Section 7E on deemed income from property also recorded a 10 percent decline.
President of the Real Estate Consultants Association (RECA), Muhammad Ahsan Malik, welcomed the government’s efforts, stating that the real estate and construction sectors support dozens of industries and play a crucial role in job creation. He expressed hope that the proposed tax relief would help accelerate economic activity and support Pakistan’s growth targets in the coming fiscal year.
