Islamabad, July 6, 2025 – The Federal Board of Revenue (FBR) has officially notified the imposition of sales tax on property development services within the Islamabad Capital Territory (ICT) for the fiscal year 2025–26.
This move comes as part of the updated Islamabad Capital Territory (Tax on Services) Ordinance, 2001, which now reflects amendments made through the Finance Act, 2025.
According to the revised notification, a 0% tax rate will apply to property development services linked to low-cost housing projects. However, this exemption is conditional. It will only be applicable if the property developers or promoters do not claim any input tax adjustment or refund. This facility specifically benefits services related to housing schemes sponsored or approved by the Naya Pakistan Housing and Development Authority (NAPHDA) or carried out under the Government’s Ehsaas Programme.
For all other property development activities in Islamabad, a fixed-rate tax will be levied. Developers and promoters—along with their allied service providers—will be subject to Rs.100 per square yard for land development. Additionally, a tax of Rs.50 per square foot will apply for building construction services. These taxes are exclusive of the actual land purchase cost or the documented cost of land.
The newly notified tax regime aims to create a more structured framework for property development in Islamabad, while supporting affordable housing efforts through selective exemptions. The FBR emphasized that these tax changes are part of a broader strategy to widen the tax net and improve revenue collection without placing undue burden on projects catering to the underprivileged.
Property stakeholders in Islamabad, including builders and developers, are advised to study the updated ordinance carefully and ensure compliance with the new tax rules. These updates reflect the government’s intention to balance economic activity in the property sector with social welfare objectives—especially in areas such as affordable housing and urban development.
The new rates are now in effect and apply to all qualifying services rendered in the current fiscal year.