FBR Property WHT Hits Rs169B: Key Tax Compliance Updates

The Federal Board of Revenue (FBR) amassed Rs169 billion in withholding taxes (WHT) from property sales and purchases during the first nine months (July-March) of FY 2024-25, a 24.3% increase from Rs136 billion last year, signaling critical tax compliance obligations for our clients. Despite a 15% drop in property transactions, higher tax rates drove this growth, though the FBR fell short of its 50% revenue target.

Under Section 236C (tax on property sales), WHT rates rose to 3% for filers and 6% for non-filers, up from 2% and 4%, yielding Rs84 billion, compared to Rs65 billion last year. For property purchases under Section 236K, rates increased to 3% for filers and 10.5% for non-filers, from 2% and 7.5%, generating Rs85 billion, up from Rs71 billion. Clients must ensure accurate WHT deductions and timely filings to avoid penalties under these revised rates.

The government is contemplating abolishing the Federal Excise Duty (FED) on property, which contributed a mere Rs2 billion this fiscal year, charged at 3% for filers, 5% for late filers, and 7% for non-filers. While a parliamentary bill is likely, an ordinance may face IMF resistance, a development our firm is closely monitoring for tax planning opportunities.

Additionally, a 15% Capital Gains Tax (CGT) on property profits has been introduced, to be reported in upcoming income tax returns, requiring clients to assess gains and ensure compliance with FBR guidelines. Meanwhile, the salaried class contributed Rs370 billion, outpacing property and export sectors, highlighting the need for strategic tax management across income streams.

Our firm advises clients to review property transaction records, optimize WHT obligations, and prepare for CGT declarations, ensuring full compliance with evolving FBR regulations.