ISLAMABAD: The federal government is considering reducing transaction taxes on the real estate sector in the upcoming budget to stimulate property market activity and enhance overall tax revenue.
Sources said significant relief is expected for the real estate sector as part of the government’s efforts to promote real estate and construction activities, which are closely linked to employment generation and economic growth.
According to sources, the government has informed the International Monetary Fund (IMF) about its proposal to reduce transaction taxes on property transactions. Officials believe that lower taxes will encourage greater buying and selling activity in the property market, ultimately leading to higher tax collection.
The proposed measures include a reduction in withholding tax under Section 236K of the Income Tax Ordinance, 2001, on property purchases from 1.5 percent to 0.25 percent.
Similarly, withholding tax under Section 236C on property sales may be reduced from 4.5 percent to 1.5 percent.
Sources added that the Federal Board of Revenue (FBR) has already reduced its property valuation rates by 30 to 35 percent over the past three months to help revive the sector.
However, no relief is expected for non-filers in the upcoming budget. The existing 10.5 percent tax on property transactions by non-filers is likely to remain unchanged.
Officials cited a significant decline in tax collections due to high tax rates. During July-March of the current fiscal year, withholding tax collection under Section 236K fell by 29 percent compared to the same period last year.
Collections from capital gains tax under Section 37A also witnessed sharp declines, with receipts from the 5 percent and 10 percent tax slabs dropping by 68 percent and 64 percent, respectively.
Meanwhile, income tax collection on deemed income under Section 7E recorded a 10 percent decline during the July-March period of the current fiscal year.
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Speaking to ARY News, President of the Real Estate Consultants Association (RECA), Muhammad Ahsan Malik, said Prime Minister Shehbaz Sharif’s vision to promote real estate activities is commendable.
He noted that the real estate and construction sectors support between 45 and 55 relevant industries and play a vital role in job creation. According to Malik, promoting these sectors would help reduce unemployment and contribute to achieving the government’s economic growth target of more than four percent.