Sec 7E, Super tax under Sec 4C: FBR yet to devise mechanism for refunding taxes: Butt

ISLAMABAD: The Federal Board of Revenue (FBR) has not devised any mechanism to refund taxes collected under Section 7E (deemed income tax on immovable property) and Super Tax under Section 4C (tax on high earners’ capital gain), said Waheed Shahzad Butt, Chairman LTBA Public Interest Litigation Committee, who is seeking a clear, policy-level system to enable taxpayers to reclaim amounts already paid or recovered.

More than three months have elapsed since Chairman LTBA-PILC wrote to FBR Chairman, routed through FBR Members, seeking a notified refund procedure for both levies, yet the Board has neither issued any guidance nor prescribed an application format or forum for filing such claims, he said.

The demand follows rulings of the Federal Constitutional Court (FCC), which struck down Section 7E in its entirety as unconstitutional and void from inception, setting aside all notices and proceedings initiated under the provision introduced through the Finance Act 2022. The levy had targeted properties valued above Rs25 million at five percent of FBR-assessed fair market value.

On Super Tax, the FCC upheld the provision’s constitutional validity but excluded certain exempt capital gains from its scope, effectively meaning the tax cannot be charged on the sale of immovable property held beyond the prescribed holding period, inherited property, or otherwise exempt income, Waheed explained.

The continued silence of FBR on a refund route, despite binding constitutional pronouncements, has placed taxpayers in an untenable legal and financial position, Waheed said, noting that the Section 7E refund universe is potentially far wider given that the provision was struck down altogether, while Super Tax refunds would apply wherever the tax was charged on already-exempt income.

LTBA-PILC is seeking a clear, policy-level system mechanism for taxpayers to reclaim amounts paid or recovered. “Same may be allowed as adjustment against tax liability for the tax year 2026,” Waheed added.

He said this interim arrangement could be operationalized through the annual return for Tax Year 2026, with field formations directed to accept and process such adjustments uniformly across all tax jurisdictions, rather than leaving the matter to the discretion of individual Commissioners or Regional Tax Offices.

Waheed reiterated his call upon the Board to communicate, without further delay, the procedure through which taxpayers may claim refunds or adjustments of amounts recovered under the two contested provisions, and to ensure consistent treatment of such claims nationwide. He cautioned that prolonged inaction exposes FBR to further litigation, including complaints before the FTO, as affected taxpayers seek redress for sums held to be unlawfully retained despite clear constitutional court findings against their collection.

Copyright Business Recorder, 2026