KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has made a strong appeal to the government to abolish Section 7E of the Income Tax Ordinance, 2001 in the upcoming federal budget for 2025–26.
The demand comes amid growing concern over declining investment in Pakistan’s real estate sector and the rising outflow of capital to foreign markets.
In its formal tax proposals, the FPCCI emphasized that Pakistan’s real estate sector plays a critical role in driving economic activity. It supports a broad network of allied industries such as cement, steel, and construction services, while also providing substantial employment and contributing significantly to GDP growth. However, the sector remains overburdened by excessive taxation measures that are stifling development.
Among these measures, Section 7E has drawn particular criticism. Introduced as a deemed income tax, Section 7E imposes tax at 20% on 5% of the fair market value of immovable capital assets held by individuals—even if the property generates no actual income. The FPCCI argues that this provision is not only excessive but inherently flawed in its structure and application.
The FPCCI has identified several serious issues with Section 7E:
• Double Taxation: Taxpayers are unfairly taxed on presumed income without earning any actual return, effectively resulting in double taxation.
• Investment Deterrent: Section 7E discourages investment in local property markets, leading to a shift in investor focus towards offshore real estate, particularly in destinations like Dubai.
• Legal Concerns: The FPCCI contends that Section 7E is unconstitutional and violates the principles of lawful taxation under the Constitution of Pakistan, 1973.
The FPCCI firmly maintains that Section 7E represents a punitive and irrational policy that harms genuine investment and encourages capital flight. According to the FPCCI, rather than broadening the tax base, Section 7E has alienated investors and distorted the real estate market.
As part of its budget recommendations, the FPCCI has urged the government to immediately repeal Section 7E from the Income Tax Ordinance. This, it asserts, will restore investor confidence, halt the trend of capital outflow to offshore markets, and stimulate growth in a vital sector of the national economy.
