Proposed relief target withholding tax on property transactions for filers as budget details emerge ahead of FY2026-27
The government is considering significant tax relief measures for Pakistan’s real estate sector in the upcoming FY2026-27 budget, aiming to stimulate economic activity, boost construction and generate employment, according to sources familiar with the matter.
The proposed changes focus on reducing withholding taxes imposed under Sections 236K and 236C, which govern property purchases and sales.
Under the proposal, the withholding tax on property purchases for tax filers could be reduced from 1.5% to 0.25%, while the tax on property sales may be cut from 4.5% to 1.5%, marking a substantial easing in transaction costs.
Sources said the government has already briefed the International Monetary Fund (IMF) on its intention to lower property transaction taxes as part of broader fiscal discussions.
Officials believe that reducing taxes on real estate transactions could help revive market activity, encourage documentation, and ultimately expand the tax base, even as short-term revenues may decline.
However, the proposed relief is expected to remain limited to tax filers. Non-filers are unlikely to receive any concessions in the upcoming budget, with the existing 10.5% tax rate on property transactions expected to stay unchanged to discourage undocumented activity.
Separately, sources in the Ministry of Finance provided key macroeconomic indicators ahead of the budget presentation.
The total federal budget outlay for FY2026-27 is projected at Rs17.1 trillion, with economic growth targeted at 4.1% and inflation estimated at 8.4%.
According to the proposed framework, the Federal Board of Revenue (FBR) is expected to be assigned a tax collection target of Rs15.267 trillion. Petroleum levy collections are projected at Rs1.727 trillion.
On the expenditure side, development spending is estimated at Rs1.1 trillion, while debt servicing is projected at Rs7.824 trillion and defence expenditure at Rs2.665 trillion.
The proposed fiscal plan reflects ongoing efforts to balance economic stimulus measures with fiscal consolidation targets ahead of the new financial year.
