by 🎯 What’s Been Announced?
In a bold move that came into effect on July 1, 2025, the Federal Board of Revenue (FBR) has significantly hiked advance tax (withholding tax) on property sales as per Section 236C of the Income Tax Ordinance of 2001. Registrars across housing societies, municipal authorities, and real estate developers are now required to deduct this increased tax from sellers at the point of sale.
🔍 The New Tax Rates for Sellers
| Property Value (PKR) | Previous Rate | New Rate |
|---|---|---|
| Up to 50 million | 3% | 4.5% |
| 50 – 100 million | 3.5% | 5.0% |
| Over 100 million | 4% | 5.5% |
These elevated rates are focused at the source—ensuring immediate collection and enforcing compliance.
🏗️ Budget Context & Rationale
1. Revenue Collection Intensified
Targeting a whopping Rs 14.1 trillion, the FBR’s FY26 agenda includes a broad tax base expansion and stricter compliance mechanisms—of which this property tax hike is a core element.
2. Boosting Tax Net & Compliance
With only ~5.9 million tax filers in a country of 71 million workers, the FBR is cracking down through strict withholding, e-invoicing, and e-billing systems.
3. Balancing Buyer Relief vs. Seller Burden
While relief was offered to buyers via reduced withholding tax on purchases (slashed from 3–4% down to 1.5–2.5%) the seller tax hike aims to offset this shortfall and reinforce fiscal discipline.
🧠Implications for the Real Estate Sector
- Sellers: Will feel pinch up front—more tax deducted at registration, trimming sale proceeds.
- Market Effect: May slow the pace of deals, raise asking prices, or shift negotiation to account for higher taxes.
- Compliance Signal: Firms need robust tax planning; non‑compliance is now costlier and riskier.
đź’ˇ In Brief
The FY26 budget represents a pivot point: while buyers are eased in, sellers are now at the sharp end of the tax rollercoaster. Whether this will cool speculative sales or just burden legitimate sellers remains to be seen—but it’s undeniably a strong compliance message from FBR.
đź”” Bottom Line for Stakeholders
- If you’re selling property → prepare for an upfront tax hit (4.5–5.5% deducted at source).
- If you’re buying property → enjoy lower purchase taxes, but ensure seller-side compliance to avoid post-transaction hassles.
- For developers/investors → revisit pricing models, tax provisions, and RSF (registered sale form) planning.
