Islamabad, August 3, 2025 – The Federal Board of Revenue (FBR) has clarified the recent changes made to withholding tax rates on the sale and purchase of immovable property under the Finance Act, 2025.
In its latest Income Tax Circular No. 1 of 2025-26, the FBR outlined the amendments to the Income Tax Ordinance, 2001, particularly those affecting transactions involving real estate. These revisions are intended to balance tax collection between buyers and sellers, while aligning advance taxes with capital gains obligations.
According to the FBR, the withholding tax rates for buyers have been reduced by 1.5% across each slab to offer relief to genuine purchasers of property. However, to offset this reduction, the withholding tax rates for sellers have been increased by 1.5% across all applicable slabs.
The FBR stated that this adjustment is meant to ensure that sellers contribute more toward taxes on the capital gains earned through property sales. These gains are often substantial and were previously underreported or lightly taxed due to lower withholding rates.
Additionally, the Tenth Schedule has been revised to reflect these changes for late filers and non-filers. Buyers in these categories will also see a 1.5% reduction in withholding tax, while sellers, regardless of filer status, will face a corresponding increase in rates.
These changes are part of the FBR’s broader strategy to improve tax compliance and revenue from the booming property sector.