Budget 2026-27: Tax reduction to property purchasers and sellers on the cards

The federal government is also examining tax relief measures for the real estate industry in the next Budget 2026-27. Proposed cuts in transaction taxes on property purchase and sales for tax payers are being evaluated.

Official sources said the budget may also decrease transaction taxes imposed on taxpayers involved in property transfers. The suggested reforms are intended at providing relief to the real estate sector and promoting verifiable economic activity.

The withholding tax on property transactions under section 236K could be decreased from 1.5 per cent to 0.25 per cent, sources in the Finance Ministry indicated. The suggested cut is being discussed as part of broader moves to alleviate the tax burden on property buyers.

The withholding tax under section 236C on the sale of property can also be reduced in a similar way. The existing rate of 4.5 percent is likely to be reduced to 1.5 percent under the proposed budget measures.

Sources at the Federal Board of Revenue (FBR) said the International Monetary Fund (IMF) has been told about the proposed changes in the taxes on property sector.

But the non-filers are not expected to get any relief in the 2019 budget. Sources said non-filers presently pay a combined 10.5 percent on property purchases and transactions, and the rates are likely to remain constant.

Officials said the collection of withholding tax rose by 29 percent during the current fiscal year from July to March over the same time of the previous year. Sources said that despite the increase in revenue from withholding tax, revenue from gain tax dipped from the previous fiscal year due to the impact of greater taxing on property transactions.

The reforms are expected to be finalised as part of the release of the federal budget for the next fiscal year.