Islamabad: The federal government has decided to abolish the 3% Federal Excise Duty (FED) on the first sale of all properties in Pakistan, a move expected to take effect after July 2025. The decision, which reverses a widely criticised tax policy introduced in last year’s budget, comes after months of backlash from real estate stakeholders and legal challenges over jurisdiction.
According to senior officials at the Federal Board of Revenue (FBR), the duty will be withdrawn through formal legislation in the coming weeks. The move is part of broader discussions with the International Monetary Fund (IMF), which is set to send a budget review mission to Pakistan on May 14 to evaluate fiscal policies for the 2025–26 budget.
The abolished duty had imposed a 3% charge on property transfers by tax filers, and up to 7% for non-filers. It applied to all commercial and residential properties on their first sale or allotment after June 30, 2024. However, the tax faced strong resistance from provincial real estate authorities, with negligible revenue collected between July and March due to concerns over constitutional jurisdiction—since immovable property taxation falls under the provincial domain.
“The 3% FED will be withdrawn. A summary has already been moved, and legislation is expected to follow shortly,” said Dr. Najeeb Memon, FBR spokesperson. He noted that the Prime Minister’s Task Force on Housing had formally recommended abolishing the duty due to its adverse impact on the property market.
Finance Minister Muhammad Aurangzeb has approved the summary for cabinet review. Once passed, the Federal Excise Duty Act will be amended accordingly.
The government is also considering scrapping other recent tax measures, including the 10% income tax surcharge on individuals earning over PKR 10 million annually. This measure, along with various taxes on large properties and farmhouses in Islamabad Capital Territory, was introduced in the previous budget as part of last-minute adjustments.
Market experts say removing the FED could help revive real estate transactions, which have slowed amid high taxes and elevated property prices. Unlike withholding taxes, the FED was non-adjustable and had added significantly to transaction costs.
Despite the challenging environment, the government collected PKR 108 billion in withholding taxes on property transactions during the first half of the current fiscal year—an 18% increase from the same period last year.
The housing task force has also recommended abolishing the deemed income tax on properties, rationalising stamp duties across provinces, and exempting certain buyer categories—such as first-time homeowners and low-income housing projects—from transaction taxes. Further proposals include revising property valuations every three years and returning to a slab-based capital gains tax structure.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
