The 3% FED tax on property sellers is expected to be abolished in the coming months. The Federal Government of Pakistan, on the proposal of FBR and the suggestions of real estate stakeholders, is planning to withdraw the 3% FED on property sales. The Prime Minister of Pakistan, Shahbaz Sharif has approved the summary, as reported by Business Recorder.

Although this news has impacted the market positively, it is important to understand that this will benefit only first-time sellers and not everyone. FED was applied on three categories of investors as, 3% on filers, 5% for late filers and 7% for non-filers. 

Effects of 3% FED Removal – Who Will Benefit?

Those who were waiting for the right time to sell their plot, house or apartment and were reluctant due to the 3% FED, buckle up. Now they don’t have to pay the FED. However, if you are someone who has been previously selling your commercial or residential property, you will not be exempted from this tax. 

Therefore, real estate experts have suggested that the removal of 3% FED on real estate will not have any major impact on the market. On the other side, it will encourage some activity and boost seller’s confidence who were disappointed by the downward trend of real estate in Pakistan. 

How 3% FED Entered Real Estate in Pakistan?

The Federal Excise Duty started from 2005 and was previously applied on products and services only. During July 2024, the 3% FED was introduced in the real estate sector of Pakistan, and remained effective for 10 months. The basic purpose for this tax was to regularize the sector and generate more revenues. 

However, the backlash from real estate stakeholders, and the FBR’s data of insufficient tax collection during this time, compelled the government to end this tax. Although, International Monetary Fund, IMF, has showed consent on the abolition of 3% FED, yet the country awaits the official notification. 

What are Taxes other than 3% FED on Real Estate?

There are five to six types of other charges, including taxes, that the property buyers and sellers have to pay in Pakistan. These includes Advance Tax, Capital Value Tax CVT, Stamp Duty, Membership Fee, Transfer Fee, File Fee, and Tehsil Municipal Authority (TMA) Tax. This complex system of taxes creates a difficult environment for investors to sell or buy property in Pakistan.

Property buyers, sellers and builders express their concern over a number of taxes that discourages people and the whole market suffers from a slow down. Everyone has eyes on the budget 2025-26, expecting a tax relief for real estate and construction packages. A common sentiment is that removing only the FED will not be sufficient to revive the sector. 

The stakeholders also demand provincial taxes removal that were not present seven, eight years ago. Investors and general users also want to reduce Advance Taxes, CVT, both of these actions will create substantial impact. Ultimately, it will boost the whole sector including the real estate market of Rawalpindi and Islamabad, Quetta, DHA Karachi, DHA Lahore, DHA 7 Islamabad and adjoining areas. Stay informed on 360 Buzz in the real estate market of Pakistan.