ISLAMABAD: The Federal Board of Revenue’s new notification of upward revised values of immovable properties in Islamabad has created ambiguity and financial hardship for sellers, buyers and developers operating under long-term installment plans vis-à-vis purchase of plots.
Muhammad Ahsan Malik, senior real estate analyst has requested FBR Chairman, seeking clarification regarding applicability of Advance Tax under Sections 236C & 236K of the Income Tax Ordinance, 2001, in light of new FBR valuation (2026) and its interaction with Section 37A.
An urgent clarification is needed regarding the correct application of advance tax deductions under Sections 236C and 236K of the Income Tax Ordinance, 2001. The current ambiguity is causing disputes between sellers, buyers and Developers and leading to incorrect tax deposits.
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Analyst believed that taxing unrealized gains on installment sales based on new notifications creates an undue burden on the taxpayer and is against the spirit of the income tax laws which typically tax income when it is received.
The recent notification of new FBR valuations for Islamabad, effective from 2nd February 2026, has created significant ambiguity and financial hardship for Seller, Buyer and Developer operating under long-term installment plans vis-à-vis purchase of plots. The people are engaged in the sale/purchase of residential and commercial plots. A significant volume of sales is conducted on installment basis, with payment plans spanning two to three years. It is standard practice that at the time of each installment payment (or down payment), Advance Tax under Section 236K (by the purchaser) is duly deposited, he said.
With the enforcement of the new FBR valuation for Islamabad on February 2, 2026, developers are now collecting the Advance Tax under Section 236C on the enhanced notified value of the plot, rather than on the actual installment amounts being received. For example, a plot sold in 2025 on a three-year plan is now subject to a higher FBR valuation in 2026. The developer is asking from the seller of the plot (under installment) to pay 236C tax on this higher notified value, despite the seller having discharged its advance tax liability under section 236K on limited number of installments paid till the execution of sale transaction.
This has created a scenario whereby the seller is getting exposed to mischief of section 37A of the Ordinance on notional capital gain i.e. the difference between value notified by FBR and the actual amount of installment paid by the seller of the plot, he maintained.
In light of the above, Federal Board of Revenue needs to clarify the following points to ensure uniform implementation of the law:
(i) In the case of a plot sold on a multi-year installment, what value should be used for the purpose of deducting Advance Tax under Sections 236C and 236K?
(ii) Will this trigger a taxable capital gain under Section 37A on the difference between the original sale price and the new FBR value, even though the developer has not actually given possession of the plot to the seller?
(iii) Does provision of section 236C and 236K is attracted during the currency of development of the plot under installments before the developer has handed over possession of the plot?
The FBR should issue a clarificatory circular or ruling at the earliest to guide the taxpayers and the tax collectors, Muhammad Ahsan Malik added.
Copyright Business Recorder, 2026
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