Govt Likely to Withdraw Excise Duty on Property Transfer

The federal government is expected to withdraw the federal excise duty (FED) on the transfer of plots and commercial properties under the Finance Act 2024 due to low revenue collected in the first half of the fiscal year. The Federal Board of Revenue (FBR) will likely propose abolishing the FED on allotments and transfers of commercial and residential properties. This may be implemented in budget 2025-26. Currently, developers and builders are required to collect FED at rates ranging from 3 percent to 7 percent depending on the buyer’s tax status. However, the absence of a monitoring mechanism has hindered the effectiveness of this tax measure. At present, 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 the gross amount of consideration involved where the buyer is appearing on active taxpayers’ list. The FED would be five percent of the gross amount of consideration involved where the buyer has not filed the income tax return. The FED would be seven percent of the gross amount of consideration involved where the buyer does not appear on the active taxpayers’ list. The government is also considering reducing transaction taxes on buying and selling immovable properties. The Taskforce on Housing Sector Development has recommended eliminating capital value tax (CVT) in Islamabad, rationalizing stamp duties across provinces, and providing tax exemptions for real estate investments up to Rs. 50 million.