The federal government has decided to eliminate the 3 percent Federal Excise Duty (FED) on the first sale of all properties, following consultations with the International Monetary Fund (IMF). The duty, including a higher 5 percent tax for non-filers, will be completely scrapped.
Finance Minister Muhammad Aurangzeb has already approved the proposal, and a formal summary to initiate the legislative process has been submitted. The government aims to abolish the tax by the end of April 2025.
The decision comes after recommendations from the prime minister’s housing task force, which had urged the withdrawal of the FED. Necessary legislation to formalize the abolition is expected to be introduced soon.
The FED was originally imposed on the first sale of all commercial and residential properties, including houses, plots, and apartments, at varying rates: 3 percent for filers, 5 percent for late filers, and 7 percent for non-filers. The tax was collected at the time of booking, allotment, or property transfer.
While the government has moved forward with the decision, the IMF has not yet publicly endorsed this policy reversal.
Additional Tax Reform Proposals
The prime minister’s task force on housing has made several other recommendations to stimulate the real estate sector. These include:
- Abolishing the deemed income tax on properties
- Harmonizing stamp duties across different jurisdictions
- Removing the capital value tax in Islamabad
- Introducing exemptions for first-time homebuyers and low-cost housing projects
- Returning capital gains tax to a slab-based system
- Rationalizing taxes on construction materials to reduce building costs
The task force had also suggested reducing the central bank’s policy rate to single digits to support real estate growth. However, both the IMF and the State Bank of Pakistan have rejected this proposal.
In addition to the FED abolition, the government is considering eliminating the 10 percent income tax surcharge currently applied to individuals earning over Rs. 10 million annually.
These measures reflect the government’s efforts to revitalize the real estate sector while balancing fiscal considerations and IMF program requirements.
