According to sources, the proposed measure could raise the CGT rate on property sales by 20 percent, potentially escalating from the existing 15 percent to as much as 35 percent.
This adjustment aims to bring real estate taxation in line with corporate sector rates, addressing the sector’s untapped revenue potential.
The proposal emerged during the first day of virtual discussions between Pakistan and the International Monetary Fund (IMF), which included two sessions focused on fiscal planning.
Sources revealed that the government is targeting a tax-to-GDP ratio of 11 percent for the upcoming fiscal year, with real estate identified as a critical area for boosting tax collection. The sector currently generates lower revenue than its capacity, prompting the need for enhanced taxation measures.
The virtual talks with the IMF also addressed plans to introduce tax measures worth PKR 400 billion in the next budget.
Government to rationalize CGT, reduce property taxes in Budget 2025–26
The federal government is set to introduce major tax relief measures for the real estate sector in the upcoming federal budget 2025–26, including rationalization of Capital Gains Tax (CGT) and reduction in withholding taxes on immovable properties, effective July 1, 2025.
According to sources cited by Business Recorder, the Capital Gains Tax, currently imposed under Section 37 of the Income Tax Ordinance 2001, will be revised in light of rising inflation and property prices. The CGT is paid by sellers upon filing their income tax returns.
In addition, the Federal Excise Duty (FED) on immovable properties is expected to be abolished altogether, while the 3% withholding tax under Section 236C currently applicable on sellers of property will be reduced to encourage real estate transactions.
The government also plans broader reforms to rationalize withholding taxes across various sectors. Rates are likely to be lowered on imports of raw materials and other financial transactions where no direct income is earned. However, withholding taxes on income-based sources such as dividends will remain in place.
The proposed tax reforms are part of a wider fiscal policy shift aimed at stimulating investment in real estate and easing compliance burdens across sectors. Further policy clarity is expected in the official budget announcement
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