The federal excise duty (FED) imposed through the Finance Act of 2024 on the transfer of plots and commercial properties is anticipated to be repealed as part of a strategy to support the real estate sector, Business Recorder reported.

Sources indicated that this taxation measure did not yield the expected results during the first half of the fiscal year 2024-25, with minimal revenue generated.

The Federal Board of Revenue (FBR) is reportedly set to recommend the elimination of the FED on the allotment or transfer of commercial properties, as well as on the first allotment or transfer of open plots and residential properties. If approved, this proposal could be implemented in the upcoming federal budget.

The government is looking to lower transaction taxes on the buying and selling of immovable properties to stimulate the real estate sector, sources have reported. A meeting of the task force focused on housing sector development has been postponed twice due to the Prime Minister’s busy schedule but is expected to take place this week.

The task force has recommended abolishing Section 7E of the Income Tax Ordinance, eliminating the capital value tax (CVT) in Islamabad, and reducing transaction taxes on property transactions.

Additionally, it has suggested standardizing and rationalizing stamp tax rates across provinces and the Islamabad Capital Territory, ensuring consistent taxation policies through the National Tax Council, and waiving wealth reconciliation for investments in real estate and construction up to Rs. 50 million.

A senior real estate expert, Muhammad Ahsan Malik stated that implementing the task force’s recommendations would positively impact the sector. He emphasized the need to reduce construction and property transfer costs and called for an end to over-selling practices in real estate.

He proposed that developers or builders who fail to deliver properties on time should face penalties, and that all transactions should occur through “ESCROW” accounts to protect public investments.

Currently, developers and builders collect a duty of three percent on the gross consideration for property transactions when the buyer is an active taxpayer.

The federal excise duty (FED) is 5% for buyers who have not filed an income tax return and seven percent for those not listed as active taxpayers.

While developers are required to deposit the collected duty to the federal government on the same day, there is no mechanism in place to verify if these amounts are deposited, which has hindered the effectiveness of this additional tax measure during the 2024-25 fiscal year, Ahsan Malik noted.

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