✅ What Tax Reliefs Does the Pakistan Budget 2025‑26 Offer for Property Buyers and Overseas Investors?

The Pakistan Federal Budget 2025–26, presented on June 10, 2025, introduces sweeping tax relief measures targeted at property buyers, overseas Pakistanis, and mortgage seekers. Designed to stimulate a sluggish real estate market, these reforms reduce transaction costs, simplify compliance, and promote formal investment. Here’s a detailed breakdown:

🏷️ 1. Lower Withholding Tax for Property Purchasers

Previously, upfront withholding tax (WHT) on property transactions stood at 4%, 3.5%, and 3% depending on transaction value. These have been slashed significantly:

  • 4% ➝ 2.5%

  • 3.5% ➝ 2%

  • 3% ➝ 1.5%

This reduction lowers initial transaction costs, encouraging more buyers to participate in formal real estate dealings.

⚡ 2. Abolition of Federal Excise Duty (FED)

The 7% FED on transfer of residential, commercial properties, and plots has been abolished entirely

  • Result: significant reduction in overall property transfer expenses

  • Benefit extends across all buyer categories, facilitating more accessible ownership

🗺️ 3. Major Stamp Duty Cut in Islamabad

Properties in the Islamabad Capital Territory now attract just 1% stamp duty, down from 4%

  • Saves buyers up to 75% in service charges in the capital region

  • Other provinces are expected to follow this model

🏡 4. Tax Credits & Mortgage Incentives

To encourage homeownership, the budget provides:

  • Tax credit on houses up to 10 marla and flats up to 2,000 sq ft

  • Supportive measures to boost mortgage financing, via easier approvals and preferential terms

These incentives improve affordability and foster growth in mass housing and mortgage lending.

🌍 5. Overseas Pakistanis: Simplified Tax Benefits

Non-resident Pakistanis with NICOP/POC are now eligible for:

  • Exemption from advance tax under Sections 236C & 236K, even if not on the Active Taxpayer List

  • FED waiver, possibly extended to them

  • FBR’s IRIS system now verifies tax-exempt status within one business day 
    This streamlines property investments for overseas Pakistanis, reducing bureaucracy and costs.

⚠️ 6. Penalties for Non‑Filers (Buyers & Sellers)

In an effort to boost formal compliance, non-filers are increasingly penalized:

  • Non-filers banned from purchasing property, vehicles, or opening bank accounts from July 1, 2025

  • Higher WHT rates apply to non-filers, compared to reduced slabs for filers—creating stark cost differences

This is part of a broader push by FBR to digitize the economy and enforce tax compliance .

📈 7. Seller’s Tax Burden Increased

While buyers gain relief, sellers face higher WHT:

  • Up to Rs 50 million: 3% ➝ 4.5%

  • Rs 50–100 million: 5%

  • Above Rs 100 million: 5.5%

This policy shift balances revenue needs but may affect seller sentiment and market liquidity.

🔍 8. Broader Real Estate & Construction Impact

  • Home finance and affordable housing get a boost via tax credits and mortgage support

  • The removal of FED and stamp duty reduces overhead for developers, potentially leading to more launches and competitive pricing

  • Real estate-linked sectors (cement, steel, labor) will benefit from revived transaction activity

✅ Summary of Tax Changes

Stakeholder Tax Relief/Change
Property Buyers WHT slashed (2.5%, 2%, 1.5%); FED abolished; stamp duty in Islamabad cut to 1%
Homeowners Tax credits for up to 10 marla houses and 2,000 sq ft flats; mortgage support
Overseas Pakistanis Advance tax/exemptions under 236C/K reinstated; fast-track via IRIS portal
Non-Filers Barred from major transactions; subject to higher WHT
Property Sellers WHT escalated to up to 5.5% based on property value

💡 Key Takeaways

  • Buyers get immediate financial relief and long-term housing incentives

  • Overseas investors benefit from simplified and lower-cost procurement

  • Non-compliant taxpayers risk exclusion and higher transactional costs

  • Sellers absorb increased WHT burdens, possibly influencing sales dynamics

  • Overall, these reforms aim to formalize the real estate sector, boost housing construction, and increase government revenues

📌 FAQs

Q1: When do these tax measures take effect?
All new rates and policies are effective July 1, 2025, marking the start of the fiscal year.

Q2: Do non-resident Pakistanis need ATL status now?
No—NICOP/POC holders are automatically exempt from advance tax, regardless of ATL listing

Q3: What if I’m a non-filer?
You won’t be able to buy property, vehicles, open bank accounts, or access many services from July 1, 2025 onwards

Q4: How do these reliefs impact mortgage availability?

Categorized in:

Real Estate,

Last Update: June 18, 2025

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