Real estate tax collection falls 28%

Real estate tax collection falls 28%

Income tax collection from Pakistan’s real estate sector fell sharply during the first two months of the current fiscal year, widening the gap between tax contributions from property transactions and the salaried class.

According to Federal Board of Revenue (FBR) data, the government collected around Rs28 billion in income tax from the real estate sector during July and August, down 28% from Rs39.4 billion collected during the same period last year.

In contrast, tax payments by salaried individuals reached Rs91 billion during the first two months of the fiscal year, registering an increase of Rs6.3 billion, or 7.5%, compared with the corresponding period last year.

The figures show that the salaried class paid more than three times the income tax collected from the real estate sector during the period. The difference has further widened following significant tax relief granted to property transactions in the latest budget.

The government reduced advance income tax on the sale and purchase of immovable property by 50%. For property sales, it merged three existing slabs and introduced a uniform tax rate of 2.75%, down from 5.5%.

Similarly, the advance tax on property purchases was reduced from 2.5% to 1.25%.

The tax cuts led to a substantial decline in revenue from property transactions. Income tax collected on property sales dropped from Rs27 billion to Rs18.4 billion during the first two months, marking a decline of Rs8.6 billion, or 32%.

Tax collection on property purchases also fell from Rs12.4 billion to Rs9.7 billion, showing a decrease of Rs2.7 billion, or 22%.

Meanwhile, the government provided the salaried class with tax relief worth around Rs52 billion in the federal budget. The measures included reducing tax rates by up to three percentage points and removing the 9% surcharge linked to the highest tax rate of 35%.

The government also raised the annual income threshold for the maximum 35% tax rate from Rs4.1 million to Rs7 million.

Despite these measures, salaried workers continue to face pressure from rising living costs, particularly higher fuel prices. The government has linked domestic petroleum prices to international oil rates while also imposing an Rs80-per-litre petroleum levy and a Rs5-per-litre climate support levy.

Frequent increases in fuel prices have also pushed up transportation and food costs, adding to the financial burden on middle- and lower-middle-income households.