Karachi, June 29, 2024 – The Finance Act, 2024 has set new rates for Federal Excise Duty (FED) on property transfers, effective from July 1, 2024. The Federal Board of Revenue (FBR) has detailed the application of these rates, which vary based on the taxpayer status of the buyer.
Initially, the Finance Bill, 2024 proposed a uniform FED rate of 5 percent on the allotment and transfer of immovable property. However, the final Finance Act, 2024 introduces differentiated rates for filers, late filers, and non-filers, alongside stipulations for the valuation at which the FED will be imposed.
According to the new rates:
• 3% FED: This rate applies to buyers listed on the active taxpayer list under Section 181A of the Income Tax Ordinance, 2001, on the date of acquiring the property.
• 5% FED: This rate is for buyers who have not filed their income tax return by the due date as specified in the proviso to Rule 1A of the Tenth Schedule of the Income Tax Ordinance, 2001.
• 7% FED: This highest rate applies to buyers not listed on the active taxpayer list under Section 181A of the Income Tax Ordinance, 2001, at the time of property acquisition.
The FED will be levied on the gross amount of consideration involved in the allotment or transfer of commercial property and the first allotment or transfer of open plots or residential property by any developer or builder. These transactions must follow the mode, manner, conditions, and restrictions prescribed by the FBR.
Sources within the FBR emphasized that these differentiated rates aim to encourage compliance with tax regulations and ensure a fairer tax burden distribution. By imposing higher rates on non-filers and late filers, the government seeks to incentivize timely tax return filings and broaden the tax base.
The implementation of these FED rates is anticipated to have significant implications for the real estate market. Property buyers and developers will need to be mindful of their tax status to manage costs effectively. Filers will benefit from lower FED rates, reinforcing the importance of maintaining an active taxpayer status.
Real estate professionals and buyers are advised to consult with tax experts and stay informed about the FBR’s specific guidelines and conditions to ensure compliance and optimize their financial planning. The new FED rates reflect the government’s ongoing efforts to enhance revenue collection and promote tax discipline across all sectors of the economy.
As the new rates take effect, their impact on property transactions and the broader real estate market will be closely watched. The FBR’s enforcement and clarity on regulations will be key in facilitating a smooth transition to this updated tax regime.