Karachi, May 22, 2025 – In a powerful and urgent appeal, the Association of Builders and Developers of Pakistan (ABAD) has demanded the immediate abolition of the controversial deemed income tax under Section 7E of the Income Tax Ordinance, 2001.
In its budget proposals for 2025–26, ABAD has labeled Section 7E as a “crippling burden” on the real estate sector, warning that it is strangling investment, causing liquidity crises, and unfairly taxing property owners on imaginary profits.
ABAD’s fiery proposal calls for the complete removal of the deemed income concept that taxes property owners 1% of their asset value—even when there is no actual income being generated. “This deemed income regime is based on fiction, not fact,” ABAD stated. “It taxes what doesn’t exist—an income that’s never realized, never received. It’s economic injustice.”
According to ABAD, the tax effectively imposes 20% on 5% of a property’s fair market value, amounting to a 1% tax on property each year, regardless of rental or sale status. “This is wreaking havoc on ordinary citizens, investors, and retirees relying on real estate savings. It must go,” ABAD asserted.
Section 7E was introduced in the Finance Act 2022 as part of a broader tax drive and has faced severe backlash ever since. The deemed income provision assumes that simply owning a capital asset equates to earning income—a concept ABAD says is unheard of in modern tax systems worldwide.
ABAD also targeted Section 7F, enforced through the Finance Act 2024, which brought builders and developers under a similar deemed income net. Calling it bureaucratic overreach, ABAD proposed scrapping Section 7F and replacing it with a transparent, area-based fixed tax model similar to Sections 7C and 7D.
“Development is a multi-year, approval-heavy process. Gross receipt taxes of 10–15% are unfair and unpredictable. A per-square-yard rate brings clarity, ensures compliance, and supports long-term planning,” ABAD explained.
The real estate sector, long seen as a pillar of economic activity in Pakistan, is being “suffocated” by the current deemed income regime, ABAD emphasized. They stressed that reforms are essential not just for the industry, but for Pakistan’s wider economy.
The ball is now in the government’s court. Will it listen to ABAD’s clarion call and abolish the deemed income disaster before it drives real estate into deeper decline?