KARACHI: The Karachi Tax Bar Association (KTBA) has urged the government and the Federal Board of Revenue (FBR) to reduce higher withholding tax rates on immovable property transactions, warning that the current taxation structure is negatively impacting the real estate sector across Pakistan.
In its budget proposals for 2026-27, the KTBA said withholding taxes imposed under Sections 236C and 236K of the Income Tax Ordinance, 2001 have become excessively high and are creating major obstacles for property buyers, sellers and investors.
According to the association, the taxes were initially introduced to document transactions and collect information about participants in the real estate market. However, the KTBA argued that the FBR has already gathered sufficient taxpayer data over the years through these measures.
The tax bar stated that the continued use of elevated withholding taxes mainly as a revenue-generation tool is placing unnecessary pressure on a sector that has already faced economic uncertainty and declining activity in recent years.
“Continuing to use these taxes primarily as a revenue generation tool places undue pressure on the real estate sector,” the KTBA said in its recommendations for the upcoming federal budget.
The association proposed a reduction in withholding tax rates to lower transaction costs and encourage investment in the property market. It said easing the tax burden could help restore investor confidence and stimulate economic activity linked to construction and real estate development.
The KTBA further suggested that instead of imposing higher taxes on non-filers, authorities should restrict their ability to carry out property transactions while clearly defining exemptions and exclusions under the law.
According to the association, such targeted enforcement measures would improve tax compliance without causing further damage to the already struggling property market.
Industry experts say the real estate sector remains highly sensitive to taxation policies, with transaction costs playing a critical role in shaping investment trends and market activity in Pakistan.
