FBR reduces advance tax rates on property sales and purchases, replacing higher slab-based rates with lower flat rates under the Finance Act, 2026.
ISLAMABAD: The Federal Board of Revenue (FBR) has announced reduced advance tax rates on property transactions, replacing earlier higher, slab-based rates with lower flat rates.
The changes have been outlined in Income Tax Circular No. 2 of 2026-27, which explains major amendments to the Income Tax Ordinance, 2001 introduced through the Finance Act, 2026.
Under the revised provisions, advance tax collected from sellers and purchasers at the time of registering, recording or attesting the transfer of immovable property has been reduced.
Tax on sale of property
Following the substitution of Division X of Part IV of the First Schedule, advance tax collected under Section 236C on the sale or transfer of immovable property has been set at a flat rate of 2.75% of the gross amount of consideration received.
The revised rate replaces the earlier slab-based structure, simplifying the calculation of advance tax on property sales.
The change is expected to lower the upfront tax liability for sellers compared with the previous rates.
Tax on purchase of property
The FBR has also revised advance tax on the purchase of immovable property.
Following the substitution of Division XVIII of Part IV of the First Schedule, advance tax collected under Section 236K will now be charged at a flat rate of 1.25% of the fair market value of the immovable property.
The new rate replaces the previous higher, slab-based rates applicable to property purchasers.
The revised structure is intended to reduce the initial tax burden associated with property purchases while making the calculation and collection of advance tax more straightforward.
Advance tax on international cards cut
The FBR has also reduced the advance tax rate applicable to transactions through international credit, debit and prepaid cards.
Under Division XXVII, the rate has been reduced from 5% to 0.5%.
The amendment represents a substantial reduction in the advance tax applicable to international card transactions.
Tax on TV plays and advertisements abolished
The FBR has also made a consequential amendment following the abolition of advance tax on TV plays and advertisements under Section 236CA.
As the tax has been abolished, Division XA of Part IV of the First Schedule has been omitted.
This removes the corresponding advance tax provision from the First Schedule of the Income Tax Ordinance, 2001.
FBR revises advance tax framework
The latest changes form part of broader amendments introduced through the Finance Act, 2026, aimed at revising advance tax provisions and rationalising selected tax rates under the Income Tax Ordinance, 2001.
The move reduces certain upfront tax obligations while replacing complex slab-based calculations with simpler flat rates for specified property transactions.
For the property sector, the revised rates could provide greater clarity for buyers and sellers when estimating their tax liabilities at the time of transferring immovable property.