Withdrawal of 3pc FED on property transfer proposed
ISLAMABAD: The Finance Bill 2025-26 has proposed to withdraw three percent federal excise duty (FED) on the transfer of residential/commercial properties from July 1, 2025.
This three percent FED is applicable on allotment or transfer of residential and commercial properties which was imposed through the Finance Act, 2024, and was subject-matter of litigation before various high courts.
Earlier, the government wanted to withdraw the same through an ordinance but was not finalised.
Property transfer: Cabinet will abolish 3-7% FED soon
Similarly, withholding taxes under Section 236K of the Income Tax Ordinance, 2001,on purchase of property have also been proposed to be reduced. The proposed rate of withholding would be 1.5 per cent where fair market value does not exceed Rs50 million, two per cent where value exceeds Rs50 million but does not exceed Rs100 million and 2.5 per cent where value exceeds Rs100 million.
Contrary to that, withholding rate under Section 236C of the Income Tax Ordinance, 2001,for the sellers have been increased to 4.5 per cent, five per cent and 5.5 per cent respectively for the corresponding values.
No reason for such disparity between the purchaser and the seller has been given.
However, apparently, the difference in tax rate would encourage the buyer to purchase property from builders and developers instead of purchasing it from the secondary market.
Copyright Business Recorder, 2025
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