ISLAMABAD: The rates of the Capital Gains Tax (CGT) and Withholding Tax on immovable properties would be rationalized in the upcoming budget (2025-26) to facilitate buyers and sellers of real estate sector from July 1 2025. Sources told Business Recorder that the rates of withholding tax would be reduced on the import of raw materials/inputs in federal budget (2025-26). The rates of withholding taxes would also be reduced on all other financial transactions except those withholding taxes where income is gained like withholding tax on dividends etc. However, the policy is to reduce rates on all kinds of withholding taxes in coming budget.
As far as real estate sector is concerned, sources confirmed that the federal excise duty would be abolished in budget (2025-26). Secondly, the withholding tax on buying and selling of immovable properties would be reduced. Presently, 3 percent withholding tax is applicable on sellers under section 236C (Advance Tax on sale or transfer of immovable Property) of the Income Tax Ordinance 2001.
The Capital Gains Tax (CGT) on immovable properties would be revised from July 1, 2025. Keeping in view inflation and cost of properties, the CGT needs to be rationalized. The CGT under section 37 of the Income Tax Ordinance 2001 would be applicable on sellers. The CGT is paid by the seller whenever he sells, he will have to pay the CGT at the time of filing of his income tax return.
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When contacted, a real estate expert, Muhammad Ahsan Malik told this scribe that Task Force for development of housing sector 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.
According to the final recommendations of the Task Force, it has recommended waiver of sub section 2A of 236C pertaining to 7E declaration & approval by Commissioner, provide basic exemptions for properties valued at up to Rs 10 million, shifting non-resident verification to an online system via NADRA and uniform rate for filers and late filers to remove disparities. Task Force has further recommended abolishing section 7 E of the Income Tax Ordinance; standardizing and rationalizing 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.
Task Force has further recommended revision of property valuations every three years to reflect market prices and introduction of exemptions for transaction tax for specific categories, such as low-cost housing, government plots, and first-time homebuyers, Muhammad Ahsan Malik added.
Copyright Business Recorder, 2025
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