Transfer of plots, commercial property: FED expected to be withdrawn

ISLAMABAD: The federal excise duty (FED), levied through the Finance Act, 2024, on transfer of plots and commercial property, is expected to be withdrawn under the plan to facilitate the real estate sector.

It is reliably learnt that the said taxation measure failed to achieve the desired result during the first six months of 2024-25. So far, the revenue generated through the said measure is negligible. The Federal Board of Revenue (FBR) is likely to propose to the government to abolish FED on allotment or transfer of commercial properties and first allotment or first transfer of open plots or residential properties, sources said.

If the proposal has been finalised, it would be implemented in the coming federal budget.

Immovable property: Govt urged to rationalise ‘prohibitive’ federal taxes

Moreover, the government is planning to reduce transaction taxes on buying and selling of immovable properties to give a boost to the business of real estate sector, sources added. The meeting of the taskforce for development of housing sector has been postponed twice due to heavy engagements of the Prime Minister last week. The meeting is expected to be held during the current week.

Taskforce has recommended abolition of section 7E of the Income Tax Ordinance, capital value tax (CVT) in Islamabad and reduction in transaction taxes on buying/selling of immovable properties.

It has further recommended standardising and rationalising stamp tax rates across provinces and ICT, abolishing CVT in Islamabad and ensuring uniform taxation policies through the National Tax Council and waiver of wealth reconciliation for investment in real estate and construction sector up to Rs. 50 million.

When contacted, Muhammad Ahsan Malik, a senior real estate expert informed that the implementation of the Taskforce recommendations would have a positive impact on real estate sector. The government should reduce cost of construction as well as the cost of property transfer.

The concept of over-selling must be stopped in the real estate sector, he said.

If any developer or builder fails to timely hand over plot/ apartment/ house; etc., to the purchaser, he should be subjected to penalty. The developers and builders should only operate through “ESCROW” accounts for protection to the investment of general public, he said.

He said that presently every developer or builder at the time of allotment or transfer of commercial property and first allotment or first transfer of open plots or residential property shall collect duty at the rate of three percent of gross amount of consideration involved where the buyer is appearing on active taxpayers’ list.

The FED would be five percent of gross amount of consideration involved where the buyer has not filed the income tax return.

The FED would be seven percent of gross amount of consideration involved where the buyer is not appearing on active taxpayers’ list.

The duty collected by developer or builder shall be credited to the federal government on the same day.

However, there was no mechanism to check whether the deducted amount has been deposited by the developer/builder in the national kitty.

In the absence of monitoring mechanism, this additional taxation measure failed to achieve the designed results during 2024-25, Ahsan Malik added.

Copyright Business Recorder, 2025