Government Introduces Major Tax Cuts on Property Transactions

Big tax cuts in property transactions that are worth up to Rs100 million on the planning list of the government. 

The Punjab Excise and Taxation Department has uncovered tax reductions in property transactions for high-value properties. The goal of this initiative is to reform the property landscape and increase transparency in the processes of taxes by offering relief to the property owners. The provincial cabinet gave his approval to this initiative that will make buying and selling real estate much easier, and the property market will increase.

Lower Taxes on Expensive Properties

Furthermore, the sources explained that the proposed plan is to reduce the tax for properties that valued at more than Rs100 million or more. These advance taxes have to be made by the filers at the rate of 4% of the value of such properties. Now, this may be reduced to as low as 0.5% which will be a huge relief for high-value property buyers.
The other major decision for non-filers is to exempt the taxes on the property that is more than Rs 10 million. It was proposed by the National Assembly’s Standing Committee on Finance meanwhile, approved by the Federal Board of Revenue (FBR). The Association of Builders and Developers of Pakistan (ABAD) also supported this development.

Government Seeks IMF Approval

The FBR has already approved these cuts, and the Prime Minister has asked officials to speed up this process. In this way, the government hopes to see a high boost in the property market. So that investors can invest without the fear of over-taxation.
On the other hand, the government wants to consult with the International Monetary Fund (IMF) before the final decision to ensure that the cuts are contained within Pakistan’s financial plans and will not adversely affect the economy of Pakistan.

Tax Cuts on Small Properties

Director General of Excise and Taxation Umar Sher Chattha stated that from now on the property tax assessments will handled by the district collector (DC). Recently, the Excise and Taxation Department declared that houses and residential plots that are up to Rs5 million have been excluded from paying the property tax, under government resolution.
Whereas, new taxpayers will only pay 25% of the total tax in the first year. Regular taxpayers have no reason to panic since their taxes did not rise this year.

Effect on Property Market

Reduction of tax prices will result in various advantages in the property sector:

• Due to the taxation relief, more people will invest in property.
• There will be an increase in the sales of properties.
• For first-time homebuyers, there would be more affordability of a home.
• It will invite more investors to invest in the real estate market rather than other forms of investment.

Crackdown on Black Money in Real Estate

Along with these cuts in taxes, the government has also been troubled to stop unaccounted income from entering the property market. The government put a bar on the acquisition of properties priced over Rs 10 million by purchasing the properties from the black funds. It has forced customers to come up with proof of income while making high-end purchases of real estate.
This rule, according to the chairman of FBR Rashid Mahmood Langrial, will have an impact on only a limited number of high-value investors. He said that over 97% of all property transactions in Pakistan are less than Rs10 million, so this move will apply to only 2.5% of people who engage in high property deals.

Final Thoughts

New tax cuts initiated by the government on property transactions, may be a turning point for Pakistan’s real estate market. For an investor, a home buyer or a seller; the changes hold new opportunities through these tax reductions, which result in more consumers purchasing property that would make a market stronger and healthier than before.