The Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has made a formal request to the Federal Board of Revenue (FBR) to withdraw the tax imposed on immovable property under Section 7E.
According to Muhammad Suleman Chawla, the Acting President of FPCCI, the entire business, industry, and trade community of Pakistan strongly believes that Section 7E, introduced in the Income Tax Ordinance (ITO) 2001, has caused chaos in economic activities.
Section 7E, introduced through the Finance Act of 2022, entails that every resident person, from the tax year 2022 onwards, is considered to have derived income equal to five percent of the fair market value of their capital asset in Pakistan, subject to certain exclusions provided in the law. This deemed income is taxed at a rate of 20 percent.
In essence, individuals with significant real estate holdings are required to pay a 20% tax on 5% of the fair market value of their property, treating this 5% as potential rental income.
FPCCI contends that this provision has proven to be ineffective, generating only Rs. 10 billion in revenue in its first year of implementation. Furthermore, it has damaged investor sentiment, both domestic and overseas, in the real estate sector.
Chawla noted that after a Lahore High Court (LHC) judgment, FBR issued a circular stating that Section 7E would not apply to cases within the jurisdiction of LHC, i.e., Punjab. He urged the caretaker finance minister to heed the long-standing concerns of the business community and instructed FBR to withdraw Section 7E for the rest of the country, fostering goodwill within the business community.
The abolition of Section 7E in ITO 2001, Chawla emphasized, would serve as a concrete confidence-building measure for the country’s economic stakeholders, demonstrating that their government is responsive to their concerns.