ISLAMABAD: The Federal Constitutional Court has ruled that Section 7E of the Income Tax Ordinance 2001 is unconstitutional, calling the tax on immovable properties โconfiscatory in nature.โ The judgment was issued in a case concerning tax charged on the โdeemed incomeโ of properties, even when such properties were not producing any actual income.
According to the court, imposing tax on a property that does not generate income can create an unfair financial burden on owners. Chief Justice Aminuddin Khan observed that such a levy may force a person to sell a non-income-generating asset simply to meet tax liability.
Section 7E was introduced through the Finance Act 2022 and allowed authorities to tax certain assets and properties on the basis of assumed income. However, the court found that the provision operated in a discriminatory manner by granting exemptions to some classes while treating similarly placed taxpayers differently.
The judgment also linked the matter to Article 23 of the Constitution, which protects the right of citizens to acquire, hold, and dispose of property. The court further noted that overlapping tax claims by federal and provincial authorities could expose taxpayers to unnecessary litigation and possible double taxation.
The decision is expected to bring relief to property owners and investors, particularly those holding land, houses, or commercial properties for long-term value rather than rental income.
For Pakistanโs real estate sector, the ruling may improve confidence by reducing uncertainty around property-related taxation.
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