Islamabad: Experts have warned that the government’s expected relief package for the construction sector will remain ineffective unless controversial provisions of Section 7E of the Income Tax Ordinance—imposing tax on deemed income from immovable properties—are abolished or substantially amended.
Real estate experts told Business Recorder that Section 7E has discouraged domestic investment in the property sector, pushing capital towards foreign markets, particularly the United Arab Emirates (UAE). They stressed that without withdrawing this tax, any relief announced for the construction industry would fail to revive activity in the sector.
According to the experts, meaningful relief also requires rationalisation of withholding taxes on property transactions. While the government reduced withholding tax rates under Section 236K on the purchase of immovable properties in the last budget, it simultaneously increased withholding tax rates under Section 236C on property sales to offset potential revenue losses.
They noted that advance withholding tax rates for buyers were reduced by 1.5 percentage points across all slabs, but corresponding increases of 1.5 percentage points were imposed on sellers or transferees. Despite the provision allowing tax adjustment, the sharp increase in withholding tax on property sales has effectively nullified the relief granted on purchases.
As a result, experts said, the intended incentive for property transactions has failed to materialise, further dampening sentiment in the real estate and construction sectors.
Official data shows that the Federal Board of Revenue (FBR) collected Rs118,882 million under Section 236K during fiscal year 2024-25, compared to Rs104,124 million in 2023-24, reflecting an increase of 14.2 percent. Meanwhile, collections under Section 236C rose to Rs118,107 million in 2024-25 from Rs95,950 million in the previous year, registering a sharp increase of 23.1 percent.
Experts argued that unless Section 7E is withdrawn and withholding tax rates on property sales are reduced, the government’s proposed construction relief package will have little practical impact on reviving the sector.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
