Construction sector: No relief until abolition of Sect 7E of income tax law

ISLAMABAD: The government’s expected relief package for the construction sector would be meaningless until abolition/ amendments in a ‘controversial’ tax of Section 7E (tax on deemed income basis) of the Income Tax Ordinance imposed on immovable properties, say experts.

Real estate experts told Business Recorder that this tax has diverted all local investments from the real estate sector to foreign destinations like the United Arab Emirates (UAE). The withdrawal of this tax is necessary for implementation of any kind of relief package for the construction sector; otherwise, there is no use of any package for the construction sector.

They said that the withholding taxes under Section 236K on purchase of property were reduced in the last budget. To avoid revenue loss, the withholding rate under Section 236C for the sellers was substantially increased. This also needs to be reduced under the proposed package.

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The advance withholding tax rates were reduced by 1.5 percent for each slab in last budget. Correspondingly, for seller/ transferee increased in withholding tax rates by 1.5 percent were made for each slab.

Despite the facility of adjustment, the extraordinary increase in withholding tax rates on sales on immovable properties has automatically ended any relief of reduction in tax rates on purchases.

The FBR collected Rs118,882 million from Section 236K (purchase of immovable properties) during 2024-25 against Rs104,124 million in 2023-24, reflecting an increase of 14.2 percent.

The FBR has collected Rs118,107 million under Section 236C(sales of immovable properties) during 2024-25 against Rs95,950 million in 2023-24, reflecting an increase of 23.1 percent.

Copyright Business Recorder, 2026