Budget 2025-26: Adjustments in Advance Tax on Sale/Purchase of Property

ISLAMABAD June 10, 2025: The Budget 2025-26 introduces significant updates to the taxation framework governing advance tax on sale/purchase of property in Pakistan. Aimed at balancing revenue generation with economic stimulation, the government has proposed adjustments to advance tax rates under Sections 236K and 236C. These changes reflect a strategic approach to influence the real estate sector while addressing fiscal goals. This article provides a detailed analysis of the proposed rates, their implications, and the broader impact on stakeholders.

حالیہ بجٹ میں جائیداد پر ایڈوانس ٹیکس 2025-26 کے نرخوں میں پراپرٹی کی خرید و فروخت کے ٹیکس میں اہم تبدیلیاں کی گئی ہیں۔ سیکشن 236 کے کے تحت جائیداد خریدنے کا ٹیکس فائلرز کے لیے 1.5 فیصد تک کم کیا گیا ہے، جبکہ لیٹ فائلرز اور نان فائلرز کے لیے بالترتیب 4.5 فیصد اور 10.5 فیصد کیا گیا ہے، جس سے رئیل اسٹیٹ میں سرمایہ کاری کو فروغ ملے گا۔ دوسری طرف، سیکشن 236 سی کے تحت جائیداد کی فروخت پر ٹیکس فائلرز کے لیے 4.5 فیصد، لیٹ فائلرز کے لیے 7.5 فیصد اور نان فائلرز کے لیے 11.5 فیصد کر دیا گیا ہے، جو سرکاری محصولات بڑھانے کے لیے کیا گیا ہے۔

فیڈرل ایکسائز ڈیوٹی کا خاتمہ، تعمیراتی شعبے کے لیے 6 فیصد سود پر فنانسنگ، اور بینک ڈپازٹس پر ٹیکس بڑھانے جیسے اقدامات سے رئیل اسٹیٹ سیکٹر کو سہارا ملے گا، جس سے طلب اور جائیداد کی قدر میں اضافہ متوقع ہے۔ تاہم، فروخت کنندگان کو بڑھے ہوئے ٹیکس کی وجہ سے لیکویڈیٹی کے مسائل کا سامنا ہو سکتا ہے۔ یہ پالیسی سرمایہ کاری کو فروغ دینے اور مالی خسارے کو پورا کرنے کی حکومتی کوششوں کو ظاہر کرتی ہے۔

Proposed Advance Tax Rates 2025-26

The budget proposes revised advance tax rates for both the purchase and sale of property, categorized based on the taxpayer’s filing status: Filer, Late Filer, and Non-Filer. The following table summarizes the proposed rates based on the latest updates:

These rates indicate a reduction in the advance tax burden for property purchases and an increase for property sales, aligning with the government’s dual objective of encouraging investment while enhancing revenue collection.

Key Changes and Analysis of Advance Tax on Sale/Purchase of Property

Section 236K: Advance Tax on Property Purchase 2025
The proposed reduction in the advance tax rate for property purchases under Section 236K to 1.5% for Filers marks a significant relief for buyers. This adjustment, down from higher previous rates, is designed to stimulate demand in the real estate market. Late Filers and Non-Filers, however, face rates of 4.5% and 10.5%, respectively, incentivizing timely tax compliance. This move is expected to boost property transactions, particularly in urban centers, by lowering the initial financial burden on investors.

Section 236C: Advance Tax on Property Sale 2025
Conversely, the advance tax on the sale of immovable property under Section 236C has been increased. The rate for Filers is set at 4.5%, with Late Filers and Non-Filers facing 7.5% and 11.5%, respectively. This hike, representing an increase of approximately 1.5% across all categories, aims to tap into the untapped revenue potential of property transactions. However, it may temporarily affect sellers’ liquidity, potentially slowing down market activity in the short term.

Broader Policy Context of Tax on Property & Real Esate 2025-26

The budget introduces several complementary measures to support the real estate sector:

• Abolition of Federal Excise Duty (FED): The complete removal of FED on property transactions is a welcome relief, reducing the overall tax burden and encouraging market activity.
• Increased Tax on Bank Deposits: A proposed 5% increase in the tax rate on interest income (from 15% to 20%) is intended to shift capital from passive savings to real estate investments.
• Low-Interest Financing: The introduction of 6% interest financing for the construction sector is poised to drive development and job creation, further supporting the industry.

Impact on the Real Estate Sector on Real Esate Sector

• For Buyers: The reduced advance tax on purchases, combined with the FED abolition, is likely to attract new investors, particularly in housing projects like DHA and other major developments. This could lead to increased demand and property value appreciation.
• For Sellers: The higher tax rates on sales may deter some transactions, especially among Non-Filers, unless offset by rising property values. Sellers are advised to plan their transactions strategically to mitigate the increased tax liability.
• Overall Market Dynamics: While the short-term liquidity of sellers may be strained, the long-term outlook appears positive with enhanced investment incentives and government support for construction.

Additional Fiscal Reforms in Budget 2025-26

The budget also includes reforms targeting other sectors, such as a 0.5% reduction in Super Tax for corporations with incomes between Rs200 million and Rs500 million, and a simplified tax return format effective July 1, 2025. These measures aim to streamline tax compliance and enhance revenue collection, indirectly benefiting the real estate ecosystem by improving economic stability.

Conclusion

The Budget 2025-26 presents a mixed bag for the real estate sector, with reduced tax burdens on property purchases and increased rates on sales. These changes reflect the government’s intent to stimulate investment while addressing fiscal deficits. Stakeholders, including buyers, sellers, and developers, should consult tax professionals to navigate these updates effectively. As clarity on pending issues, such as the status of Section 7E (Deemed Income Tax), is awaited, the real estate market is poised for a transformative phase, contingent on effective implementation and market response.

Note: This analysis is based on the proposed rates and policies as of June 10, 2025. Final rates and regulations may vary upon official enactment.

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