Pakistan’s salaried taxpayers paid significantly more tax than the real estate sector during the first four months of the current fiscal year, highlighting a widening gap in tax contributions between employees and property-related transactions.

According to provisional tax collection figures, the salaried class contributed approximately Rs193 billion in income tax between July and October 2026. In comparison, the real estate sector paid only Rs42 billion in withholding taxes during the same period.

The difference reflects the impact of reduced advance tax rates on property transactions, which significantly lowered the sector’s contribution despite signs of renewed activity in the real estate market.

Salaried Class Pays Rs193 Billion in Four Months

The salaried class contributed around Rs193 billion in income tax during July-October, compared with Rs179 billion collected during the corresponding period last year.

This represents an increase of approximately Rs13.5 billion, indicating that tax payments from salaried individuals continued to rise during the opening months of the current fiscal year.

The figures highlight the substantial contribution made by employees to government revenue through income tax deductions and other applicable tax collection mechanisms.

Meanwhile, the real estate sector’s withholding tax contribution declined considerably, widening the difference between the two sectors.

Real Estate Tax Collection Drops by 45%

The real estate sector paid approximately Rs42 billion in withholding taxes during the first four months of FY2026-27.

This was Rs34 billion, or 45 percent, lower than the amount collected during the same period last year.

The decline came after the government reduced advance tax rates on property transactions through its latest budget measures.

Interestingly, property market activity has reportedly improved following the government’s decision to reverse some earlier policies aimed at discouraging speculative investment.

However, the recovery in property activity has not translated into higher withholding tax collection because the applicable rates have been reduced.

Government Cuts Advance Tax on Property Transactions

The government’s decision to reduce advance taxes on property sales and purchases has played a major role in lowering real estate tax contributions.

Under the revised rates introduced in the federal budget, advance tax on property sales was reduced from 5.5 percent to 2.75 percent.

Similarly, the advance tax rate on property purchases was cut from 2.5 percent to 1.25 percent.

Both reductions represented a 50 percent decrease in the applicable rates.

The government introduced these concessions after the International Monetary Fund (IMF) backed the proposed reduction in June 2026.

The changes were intended to provide relief to property buyers and sellers while supporting activity in the real estate market.

Property Sales and Purchase Tax Collections Decline

The impact of the reduced rates is visible in the withholding tax figures for individual property transactions.

Advance tax collected on property sales fell from Rs52.7 billion to Rs27.3 billion during the reported period, representing a decline of 48 percent.

Meanwhile, tax collection on property purchases decreased from Rs23.1 billion to Rs14.7 billion, marking a reduction of 37 percent.

These figures demonstrate how the lower advance tax rates have affected government revenue from property-related transactions.

Although the real estate sector has experienced signs of improved activity, the reduced tax burden has resulted in substantially lower collections.

Retailers and Wholesalers Contribute Rs24.7 Billion

The wholesale and retail sectors also recorded relatively modest tax contributions during the first four months of the fiscal year.

Combined, wholesalers and retailers paid approximately Rs24.7 billion in taxes, showing an increase of 2.5 percent compared with the corresponding period last year.

When retailers and the real estate sector are considered together, their combined contribution reached approximately Rs67 billion.

This amount was Rs126 billion lower than the Rs193 billion paid by the salaried class alone.

The comparison highlights the difference between tax contributions from salaried employees and those collected from two major economic sectors.

Growing Debate Over Pakistan’s Tax Burden

The latest figures are likely to renew discussions about the distribution of Pakistan’s tax burden.

The salaried class continues to contribute substantial income tax revenue, while reduced advance tax rates have lowered collections from property transactions.

For salaried individuals, income tax is generally deducted directly from monthly earnings, making it a consistent source of government revenue.

In contrast, withholding tax collection from property transactions depends on market activity and the applicable tax rates.

The figures raise broader questions about how Pakistan can expand its tax base, improve compliance and distribute the tax burden more evenly across different sectors of the economy.

As the current fiscal year progresses, future collection data will show whether real estate tax revenues recover alongside market activity or remain below last year’s levels.

Also read: FBR Considers Ending Super Tax and Cutting Sales Tax