Islamabad: Despite an Increase in Tax Rates, FBR Collects Rs. 169 Billion from Property Transactions

The Federal Board of Revenue (FBR) has collected Rs. 169 billion in withholding tax (WHT) on real estate transactions during the first nine months of the current fiscal year (July to March), despite raising tax rates. This collection is compared to Rs. 136 billion in the same period of the previous fiscal year.

According to details, after increasing tax rates, the FBR had set a target to increase the tax amount from property transactions by 50%. However, the tax collection during the first nine months of fiscal year 2024-25 has increased by approximately 24% compared to the same period last year.

Under Section 236C, the tax rate on the sale of immovable property was 1% for filers and 2% for non-filers in the 2021 tax year, which was increased to 2% for filers and 4% for non-filers in the 2023 tax year. For the 2024 tax year, this rate was further increased to 3% for filers and 6% for non-filers.

Similarly, for the advance tax on the purchase of immovable property, the rate was 1% for filers and 2% for non-filers in 2021, which was increased to 2% for filers and 7.5% for non-filers in 2023. In the 2024-25 budget, the rate was further raised to 3% for filers and 10.5% for non-filers.

Despite this substantial increase in tax rates, the real estate sector paid Rs. 169 billion in withholding tax during the first nine months of the current fiscal year (July to March). The sector’s contribution in taxes during the same period last year was Rs. 136 billion, showing a 24.3% increase this year. However, the federal excise duty (FED) on property was almost negligible, contributing less than Rs. 2 billion to the national treasury in the first nine months of this fiscal year.

Government officials told *The News* that the federal cabinet has not yet approved the FED proposal, which may be presented in the form of a bill in Parliament. Although the government intended to issue an ordinance to remove the FED, the International Monetary Fund (IMF) has not granted approval for this.

Under the Income Tax Ordinance’s Section 236C, the FBR collected Rs. 84 billion from advance tax on the sale of property in the first nine months of the current fiscal year, compared to Rs. 65 billion in the same period last year. Additionally, under Section 236K, Rs. 85 billion was collected this fiscal year, compared to Rs. 71 billion in the previous year.

The government has imposed a 15% capital gains tax (CGT) on profits earned from the sale of property, which will be levied with the upcoming income tax returns.

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