ISLAMABAD – Another blow to property investors in Budget 2025-26 as the federal government is considering major increase in Capital Gains Tax (CGT) on property sales in upcoming fiscal budget 2024-25 – a move expected to dent real estate sector which is already reeling after last year Budget.
Sources familiar with development said the Capital Gain Tax CGT rate likely to be increased from current 15pc to as high as 40pc, bringing it in line with the corporate income tax rate. The proposal, currently under discussion, forms part of broader fiscal reforms aimed at increasing government revenue and meeting International Monetary Fund (IMF) conditions.
Federal Board of Revenue (FBR) officials argue that current tax structure allows large profits from property transactions to go largely untaxed, resulting in considerable revenue loss to the national treasury. The changes are being considered amid need for tax reforms in the real estate sector.
However, analysts and industry insiders warn that such steep increase in CGT could discourage investment and lead to a decline in property transactions, with potential ripple effects on the broader economy.
The proposed changes are reportedly being discussed during virtual negotiations with International Monetary Fund (IMF), which is closely monitoring Pakistan’s fiscal strategy as part of ongoing economic support talks. The upcoming budget is expected to target tax-to-GDP ratio of 11pc, while projecting expenditure at 20.3pc of GDP.
As the government views this move as necessary for improving tax collection and closing fiscal gaps, stakeholders in the property market are urging caution, fearing the reform may stifle growth in a key economic sector. So far, there are all proposals. and that final decision on CGT hike is expected to be announced with the presentation of the federal budget next month.
Earlier it was reported that Pakistani government, in coordination with the IMF, decided to abolish 3pc Federal Excise Duty on the first sale of properties to revive the struggling real estate market.
The government also plans to remove a 10% income tax surcharge on high earners and offer tax relief to salaried individuals, pending IMF approval. Additional reforms under consideration include standardizing stamp duties, revising property valuations, and providing tax incentives for affordable housing and first-time buyers.
IMF agrees to FBR’s request for tax relief on property purchases
