The government has introduced a 30 percent tax credit scheme on the purchase of flats and 10-marla houses in the federal budget for the fiscal year 2024-25.
This was revealed during a meeting of the National Assembly’s Standing Committee on Finance on Friday, chaired by MNA Naveed Qamar. Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial briefed the committee on key taxation reforms in the real estate sector.
According to the FBR chief, the scheme is aimed at promoting urban housing and facilitating middle-income buyers, particularly those opting for vertical housing solutions. The move is expected to provide a significant incentive for buyers of flats and 10-marla houses by offering a 30 percent tax credit on their purchase.
At the same time, the government has revised the withholding tax (WHT) structure for both the purchase and sale of immovable properties. The Federal Excise Duty (FED) on property transactions has also been abolished to ease the cost burden on buyers.
The FBR chairman stated that the new withholding tax rates for property purchases are as follows:
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For properties valued up to Rs50 million, the WHT rate has been reduced to 1.5%.
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For properties priced between Rs50 million and Rs100 million, the WHT has been brought down to 2%.
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For properties exceeding Rs100 million in value, the WHT has been reduced to 2.5%.
On the other hand, the withholding tax rates on property sales have been increased:
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For sales of properties up to Rs50 million, the WHT rate will now be 4.5%.
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For sales between Rs50 million and Rs100 million, the new rate is 5%.
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For properties sold above Rs100 million, the WHT has been fixed at 5.5%.
Chairman Langrial informed the committee that the changes were made to rationalize the tax regime and promote documentation in the real estate sector. However, he acknowledged that the International Monetary Fund (IMF) has expressed reservations over the decision to lower the withholding tax rates on property purchases, considering it a potential risk to revenue collection.
Furthermore, in a move to discourage undocumented cash transactions, the government has proposed a penalty of Rs30,000 on registered businesses found accepting cash payments exceeding Rs200,000 on the sale of goods.
The new measures are part of the government’s broader fiscal reforms to increase tax compliance, promote affordable housing, and enhance transparency in property transactions.
