The federal government is considering withdrawing the Federal Excise Duty (FED) on property transfers under the Finance Act 2024 due to low revenue collection in the first half of the fiscal year. This move may be implemented in the budget for 2025-26.
| Reason for Withdrawal | Low Revenue Collected in FY |
|---|---|
| FED not generating sufficient revenue | Government plans to withdraw it |
| Implementation expected in 2025-26 | Targeted to reduce burden on property transfers |
Current FED Rates for Property Transfers
Currently, the FED rates depend on the buyer’s tax status. Developers and builders are required to collect a duty ranging from 3% to 7% of the property’s transaction value.
| Buyer’s Status | FED Rate |
|---|---|
| Active taxpayer on the list | 3% of the transaction value |
| Buyer hasn’t filed tax returns | 5% of the transaction value |
| Buyer not on the taxpayer list | 7% of the transaction value |
Impact of FED Withdrawal
The withdrawal of the FED is expected to encourage more property transactions. With fewer taxes, buying and selling property could become easier and more attractive for buyers and developers.
| Impact of Withdrawal | Effect on Property Market |
|---|---|
| Reduced transaction costs | Likely increase in property transfers |
| More attractive for developers | Boost to the real estate market |
Additional Tax Reforms in the Property Sector
The government is considering further tax reforms in the property sector. These include the elimination of Capital Value Tax (CVT) in Islamabad and rationalizing stamp duties across provinces.
| Proposed Reforms | Expected Outcome |
|---|---|
| Eliminate Capital Value Tax (CVT) | Easier property transactions in Islamabad |
| Rationalize stamp duties | Unified tax system across provinces |
| Tax exemptions for investments (up to Rs. 50 million) | Stimulate real estate investments |
Summary
The government’s plan to withdraw the excise duty and implement other tax reforms is aimed at boosting the property market. By reducing taxes and simplifying the transaction process, the real estate sector is likely to grow, benefiting both buyers and developers.
| Key Takeaways | Expected Benefits |
|---|---|
| Withdrawal of excise duty | Boost to property market growth |
| Additional tax reforms | Easier transactions and more investments |
