Budget FY2025-26: property tax cuts for buyers, hikes for sellers

ISLAMABAD: The National Assembly on Thursday approved the federal budget for fiscal year 2024-25, introducing sweeping changes to property taxation while offering incentives for renewable energy adoption and implementing new fiscal measures.

Property market rebalanced

In a significant move affecting the real estate sector, the government has revised property tax rates effective July 1, reducing levies on purchases while increasing taxes on sales.

• Buyers will benefit from reduced withholding taxes:
  • Properties above Rs10 crore: Tax slashed from 4% to 2.5%
  • Rs5-10 crore bracket: Rate reduced from 3.5% to 2%
  • Below Rs5 crore: New rate of 1.5%, down from 3%
• Sellers face higher costs:
  • Transactions exceeding Rs10 crore: Tax up from 4% to 4.5%
  • Rs5-10 crore sales: Levy increased from 3.5% to 5%
  • Under Rs5 crore: Rate raised from 3% to 4.5%

Analysts suggest the dual approach aims to stimulate housing demand while boosting revenue from high-value transactions.

National Assembly passes Rs17.57tr budget for FY2025-26

Green energy push, fuel price adjustment

The budget prioritises sustainable development, cutting sales tax on solar panels to 10% to promote renewable energy adoption. However, motorists will bear a Rs2.5 per liter carbon levy on petrol and diesel, expected to raise pump prices.

Salary reforms & tax exemptions

Key structural changes include:

• Ministers’ salaries aligned with National Assembly members’ pay scales
• Tax exemptions for 107 institutions, including Diamer-Bhasha Dam, Shaukat Khanum Hospital, and leading universities including LUMS, GIKI and others.
• Pension reforms:
  • Full exemption for former presidents and widows
  • 5% tax on pensions exceeding Rs1 crore annually

Trade monitoring enhanced

An advanced electronic tracking system will be implemented for imports and transit goods to curb smuggling and improve revenue collection.

The budget reflects the government’s balancing act between stimulating growth through sector-specific incentives and tightening fiscal controls. Economists anticipate the measures will impact inflation, though their full effects may take months to materialise.