Two changes in 2026 have reshaped what property buyers and sellers in Pakistan pay. In May, the Federal Constitutional Court struck down Section 7E, the annual tax on “deemed income” from property. From 1 July, the Finance Act 2026 replaced value-based slabs with a single advance tax rate for filers: 2.75% on sales under Section 236C and 1.25% on purchases under Section 236K.
Both changes are already in force. This report sets out what was decided, by whom, and what it means if you are buying or selling a plot, house or apartment.
What Happened?
On 7 May 2026, a two-member bench of the Federal Constitutional Court, led by Chief Justice Aminuddin Khan, declared Section 7E of the Income Tax Ordinance, 2001 unconstitutional. Section 7E had been added by the Finance Act 2022 and taxed deemed income on immovable property worth more than Rs25 million, even when the owner earned nothing from it. Dawn reported that the court set aside all FBR actions and notices issued under the section.
The Finance Act 2026 then made three changes to property transaction taxes, according to KPMG Taseer Hadi’s brief of the Act:
- A single 2.75% advance tax on the sale or transfer of property under Section 236C
- A single 1.25% advance tax on the purchase of property under Section 236K
- Removal of the separate, higher rates for late filers
The Act also formally abolished the tax rate for Section 7E.
Details of the Changes
| Item | Before | From 1 July 2026 |
| Seller tax, filer (236C) | Rate depended on property value | 2.75% flat |
| Buyer tax, filer (236K) | Rate depended on property value | 1.25% flat |
| Late filers | Separate higher rates | Same as filers |
| Section 7E deemed income tax | Annual charge above Rs25 million | Struck down and abolished |
Non-filers did not receive the same relief. People who are not on FBR’s Active Taxpayers’ List remain subject to much higher withholding rates. Our report on Section 236K tax on installments explains how the buyer tax is applied to installment payments.
Effective Date and Timeline
- 7 May 2026: Federal Constitutional Court strikes down Section 7E
- 12 June 2026: Budget 2026-27 presented
- 1 July 2026: Finance Act 2026 rates take effect
Who Will Be Affected?
The rates apply to transfers of immovable property in general, including plots, houses, apartments and commercial units. That covers buyers and sellers in Faisal Town Phase 1, Faisal Town Phase 2, Faisal Hills and Faisal Jewel in the same way as anywhere else in the country.
Owners who received Section 7E notices in earlier years are also affected, because the court set those proceedings aside.
Implications for Property Buyers and Sellers
For a filer, the arithmetic is now simple. On a Rs10 million transaction, the buyer’s 236K would be Rs125,000 and the seller’s 236C would be Rs275,000. This is an illustration only. The tax is worked out on the value used at transfer, so ask for the final figure on your challan.
These are advance taxes. Capital gains tax, stamp duty, registration fees and society transfer charges are separate costs. When you plan a purchase, add them to the plot price and the installments in the Faisal Town Phase 2 payment plan, and agree in writing who pays each charge. The documents to prepare are listed in our Faisal Town Phase 2 booking guide.
What Is Still Unconfirmed
- The court’s detailed judgment on Section 7E was to be issued separately. Its full reasoning was not reviewed for this report.
- The exact non-filer rates by property value should be checked in the First Schedule of the Act or with FBR before a transaction.
- Whether any refunds of Section 7E tax already paid will be processed automatically has not been confirmed here.
Official Sources and Further Information
- Dawn: FCC annuls tax on deemed income from properties (8 May 2026)
- KPMG Taseer Hadi: A Brief of Finance Act 2026 (July 2026)
- ProPakistani: Govt approves reduced tax rate on buying and selling of properties (23 June 2026)
- FBR: check your filer status on the Active Taxpayers’ List
