The federal government is contemplating the removal of the federal excise duty (FED) on the transfer of plots and commercial properties under the Finance Act 2024, following low revenue collection in the first half of the fiscal year.

The Federal Board of Revenue (FBR) is expected to propose the abolition of FED on allotments and transfers of commercial and residential properties. This measure may be implemented in the fiscal year 2025-26 budget.

At present, developers and builders are mandated to collect FED at rates varying from 3 percent to 7 percent, depending on the buyer's tax status. However, the lack of an effective monitoring mechanism has reduced the efficacy of this tax measure.

Currently, developers or builders must collect duty at the rate of three percent of the gross amount of consideration involved when the buyer is listed as an active taxpayer. If the buyer has not filed an income tax return, the FED rate increases to five percent. For buyers not appearing on the active taxpayers' list, the rate stands at seven percent.

The government is also exploring the possibility of reducing transaction taxes on the buying and selling of immovable properties. The Taskforce on Housing Sector Development has recommended the elimination of the capital value tax (CVT) in Islamabad, rationalizing stamp duties across provinces, and providing tax exemptions for real estate investments up to Rs. 50 million.
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