Govt to Abolish 3% FED on First Sale of Properties in Pakistan

ISLAMABAD: In a major relief for the real estate sector, the federal government has decided to abolish the 3% Federal Excise Duty (FED) on the first sale of properties across Pakistan. The move comes nearly 10 months after the duty was imposed and is expected to revive a struggling property market.

A senior official from the Federal Board of Revenue (FBR) confirmed that the decision was made in consultation with the International Monetary Fund (IMF). The abolition will apply to both 3% FED for tax filers and 5% for non-filers on the allotment or transfer of property. A formal summary has already been moved to initiate the legal process.

Dr. Najeeb Memon, FBR spokesperson, stated that the prime minister’s housing task force had recommended scrapping the FED, and legislation to abolish it is expected soon. The aim is to complete the process by the end of this month, pending cabinet approval and legal amendments to the Federal Excise Duty Act.

The tax, introduced in the FY 2024-25 budget, had faced widespread criticism and legal challenges, as land and property fall under provincial jurisdiction. Many real estate authorities had refused to collect the duty, resulting in negligible revenue collection.

Finance Minister Muhammad Aurangzeb has already approved the proposal to abolish the duty. Meanwhile, an IMF budget review mission is expected in Pakistan on May 14 to discuss the upcoming 2025-26 fiscal plan.

Previously, the FED applied to all first sales of houses, plots, and apartments after June 30, 2024. Rates were 3% for filers, 5% for late filers, and 7% for non-filers, collected at the time of booking or transfer.

Additional real estate taxes introduced last year—including fixed taxes on large farmhouses and homes in Islamabad and a 4% stamp duty—remain in place.