Islamabad: The federal government is preparing to unveil significant tax relief measures for the real estate sector in the upcoming Budget 2025–26, aimed at boosting property market activity and easing tax burdens on transactions.
Effective from July 1, 2025, the proposed reforms include the rationalization of Capital Gains Tax (CGT) and a reduction in withholding taxes on the sale and purchase of immovable properties, according to sources cited by Business Recorder.
Under the current tax framework, CGT is imposed on the sale of real estate under Section 37 of the Income Tax Ordinance, 2001. The planned revision will adjust CGT rates to reflect the impact of rising inflation and escalating property prices. The tax is paid by property sellers at the time of filing their income tax returns.
Additionally, the government is expected to abolish the Federal Excise Duty (FED) on immovable property transactions. A key withholding tax under Section 236C—currently set at 3% and charged to sellers—is also likely to be reduced to encourage more transactions in the formal property market.
These proposals form part of a broader fiscal strategy aimed at stimulating investment in the real estate sector and simplifying the tax structure. The government also plans to rationalize withholding taxes across various sectors, particularly where no direct income is earned. For example, lower rates are expected on the import of raw materials and certain financial transactions. However, income-based taxes, such as those on dividends, will remain unchanged.
Analysts view the reforms as a move to improve compliance, enhance liquidity in the property sector, and attract both domestic and foreign investment. Full details of the proposed measures will be announced in the federal budget presentation, expected in June.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
