The federal government has unveiled a strategic package of tax reforms for the real estate and construction sectors in the Budget 2026-27. Designed to breathe new life into the property market, these measures aim to drive investment, boost transaction volumes, and promote broader tax compliance across the industry.
Key Highlights of the Relief Package
The government’s proposal centers on two primary adjustments intended to reduce the financial burden on market participants:
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Slash in Withholding Tax Rates: To incentivize formal participation, withholding tax rates for active taxpayers have been halved:
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Property Buyers: The rate for filers is reduced from 2.5% to 1.25%.
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Property Sellers: The rate for filers is reduced from 5.5% to 2.75%.
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Repeal of Section 7E: Responding to long-standing industry criticism and aligning with recent judicial decisions, the government has officially proposed the removal of Section 7E. This provision, which imposed a "deemed income" tax of 5% on the value of certain immovable properties, was ruled unconstitutional by the courts. Its abolition removes a significant hurdle that had been a major point of contention for investors and developers.
This legislative shift signals a proactive effort by the government to foster a more business-friendly environment for the property sector. By lowering transaction costs and eliminating controversial tax structures, policymakers are hopeful that activity in the real estate market will see a robust recovery in the coming fiscal year.
