Sellers hit with heftier taxes in property deals

ISLAMABAD: The government has proposed abolishing three percent Federal Excise Duty (FED) and reducing the Withholding Tax (WHT) on the purchase of property for different slabs in the Finance Bill 2025-26.

The WHT on sellers has also been increased in the Budget for 2025-26 with the consent of the International Monetary Fund.

The Finance Bill proposed to abolish three percent FED on the transfer of residential/ commercial properties from July 1, 2025 after it was agreed with the IMF during the first review under EFF programme few months back.

The Withholding Tax under Section 236K of the Income Tax Ordinance, 2001, on purchase of property have also been reduced. The proposed rate of withholding would be 1.5 percent where fair market value does not exceed Rs50 million, two percent where value exceeds Rs50 million but does not exceed Rs100 million and 2.5 percent where value exceeds Rs100 million.

On the other hand, the WHT rate under Section 236C of the Income Tax Ordinance, 2001, for the sellers have been increased to 4.5 percent, five percent and 5.5 percent respectively for the corresponding values. The government incentivised purchaser of the property but increased tax rate on seller proportionally in order to increase revenue efforts from the property market.