ISLAMABAD: Federal Board of Revenue (FBR) Chairman Rashid Mahmood has agreed, in-principle, for reducing withholding taxes on property sales/purchases and reconsidering 5 percent FED on property transactions to grant tax relief for first-time home buyers and fiscal measures for affordable housing schemes.
Sources told Business Recorder that the issue was discussed during the meeting of working group on Taxation-Task Force for development of housing sector, which was chaired by Chairman FBR. The FBR Chairman patiently listened to the viewpoint of all stakeholders and agreed to necessary incentives to the construction sector and facilitation to the overseas Pakistanis.
The meeting noted with concern over high transaction taxes on property sales and purchases under sections 236C and 236K of the Income Tax Ordinance 2001, which have risen significantly in recent years, leading to a decline in number of transactions. It was appraised that quantum of taxes on a single transaction have reached a high of 13% (4% on sale/purchase, 5 % FED and 4% stamp duty provincial).
WHT’s share in collection of direct taxes stands at 60pc
The FBR Chairman agreed in principle to consider reduction in these taxes along with proposal to reconsider the 5% FED on property transactions subject to the agreement by provinces that they will not increase taxes on real estate.
On the issue of non-filers, the FBR Chairman took a strong stance against the non-filers and declined to give any concessions. FBR Chairman, however, showed concern on the issue of verification process for non-residents and was of the opinion that this verification should not be with the field offices, rather it should be done online in collaboration with NADRA.
A committee was formed to rationalize transaction taxes at federal and provincial levels and propose fiscal measures for low-cost housing, led by Member Policy FBR with representatives from real estate and housing sectors. The committee included Ahsan Malik Real Estate Analyst; Sardar Tahir Mehmood (President, Federation of Realtors, Pakistan); Maj General Aamir Aslam Chairman NAPHDA; Hafiz Mian M Nauman (ex MPA) and Waseem Hayat Bajwa, DDG Policy & Planning Wing, MoH&W (Secretary).
The committee will address design and definitional issues related to Section 7E.
It has been decided that the property valuation rates will be aligned with market values, reviewed annually before the financial year ends, and supported by a robust valuation mechanism in coordination with Inland Revenue Operations Wing (FBR) & field offices. It will be discussed further in thenext meeting.
The proposals for tax relief for first-time homebuyers and fiscal measures for affordable housing will be presented for further deliberations.
Directorate General of Designated Non-Financial Business and Professions (DNFBPs) will be enhanced with additional workforce, funding, logistics, and digitalization measures for improved transparency, or alternative detailed proposals to follow, sources said.
The income tax on deemed income under Section 7E was also discussed. Although it was explained that the said tax is not applicable on such properties as are generating income which is being offered to tax. However, concerns about its impact on idle and undeveloped plots and claims of double taxation were raised by the participants. FBR Chairman principally agreed that the proposals about taxes on undeveloped plots may be reviewed and directed to form a joint committee to address design and definitional inconsistencies in the said law.
The FBR Chairman proposed aligning valuation rates with market values as well as DC rates, conducting annual reviews, and strengthening mechanisms in coordination with field offices. The Member (IR-Policy) also assured that the matter is being given due consideration and is also an agenda item for discussion in upcoming meeting of Executive Committee of National Tax Council for having a coordination with provinces on this matter, sources added.
The verification process for non-residents will be streamlined through an online system, reducing reliance on field offices, with the office of Member Operations (IR) leading the implementation.
When contacted, Real Estate Analyst Ahsan Malik was very optimistic that the incentive package would soon be finalized and likely to be announced in February 2025.
Real estate expert was positive and hopeful that the package would contain incentives for first-time homebuyers and fiscal measures for affordable housing schemes.
Copyright Business Recorder, 2025
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