The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has recommended the removal of advance tax on the first property purchase to encourage real estate investment and economic growth. This proposal is part of its budget recommendations for 2025-26, aimed at making property ownership more accessible and stimulating market activity.
Current Tax Structure and Concerns
Under the existing tax framework, filers are required to pay a 3% advance tax on property purchases, even though the income used for buying the property has already been taxed. The FPCCI argues that this results in double taxation, discouraging investment in the real estate sector and slowing down market transactions.
Proposed Tax Reduction and Exemptions
To ease the financial burden on property buyers, the FPCCI has suggested:
- Reducing the advance tax for filers from 3% to 0.5%
- Granting a complete exemption to salaried individuals, who already contribute significantly through payroll deductions
Abolition of Section 7E for Real Estate Growth
The FPCCI has also called for the removal of Section 7E of the Income Tax Ordinance, 2001, which imposes a deemed income tax on capital assets. The federation believes this provision discourages property investment by increasing tax liabilities.
Impact on the Real Estate Sector
Eliminating unnecessary tax burdens would:
- Encourage local and foreign investment in real estate
- Enhance housing affordability for the middle class and salaried individuals
- Promote formalization and transparency in property transactions
- Strengthen economic stability by stimulating real estate activity
Government Consideration for the Budget
The FPCCI has urged the government to incorporate these tax reforms in the upcoming federal budget. It believes that a strong real estate sector is crucial for economic development, as it generates employment, increases revenue, and fosters a stable investment environment.
