Govt likely to scrap up to 7 per cent FED on property transfers

ISLAMABAD: The federal government is expected to abolish the 3 to 7 per cent Federal Excise Duty (FED) imposed on the transfer of plots and commercial properties through the Finance Act 2024, in a move aimed at reviving the sluggish real estate sector.

According to senior officials at the Federal Board of Revenue (FBR), Prime Minister Shehbaz Sharif has already given the green light to eliminate the FED on property transactions. A formal summary has been forwarded to the federal cabinet for final approval.

The government is considering two possible routes to carry out this withdrawal—either by introducing a Bill in Parliament or through a Presidential Ordinance. However, sources indicate that the preferred option is to table a Bill for immediate legislative action.

If approved, the abolition will also extend to the Computerised Payment Receipt for FED (CPR-FE), which is currently required during the allotment or transfer of commercial properties, and for the first allotment or transfer of open plots or residential properties.

Sources familiar with the matter said the decision comes after the measure failed to yield significant revenue in the first half of the 2024–25 fiscal year. Collections under this duty have remained negligible, prompting the authorities to reconsider its viability.

Under the current regime, developers and builders are required to collect FED at the time of the transfer or first allotment of property. The applicable rates are:

• 3 per cent if the buyer is listed on the active taxpayer list (ATL) under section 181A of the Income Tax Ordinance;
• 5 per cent if the buyer has not filed a tax return by the specified deadline under the Tenth Schedule;
• 7 per cent if the buyer is not on the ATL at the time of the transaction.

The FBR had also introduced two forms—Form A and Form B—for documenting these transactions. Form A deals with the CPR-FE, while Form B includes transaction details such as the buyer’s name, property location, purchase value, and the applicable FED rate.

With this move, the government is hoping to remove barriers that have hampered property transactions and stimulate activity in the real estate market.

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