Section 236C of the Income Tax Ordinance requires sellers to pay advance tax at the time of property transfer, with exemptions for specified government allottees and overseas Pakistanis.
The Federal Board of Revenue (FBR) has outlined rules for the collection of advance income tax on the sale or transfer of immovable property during Tax Year 2027.
The FBR issued the Income Tax Ordinance, 2001, updated up to June 30, 2026, covering Tax Year 2027, which runs from July 1, 2026, to June 30, 2027.
According to Section 236C of the ordinance, any person responsible for registering, recording or attesting the transfer of immovable property must collect advance tax from the seller or transferor at the rates specified in Division X of Part IV of the First Schedule.
The requirement applies to registration and transfer authorities, including local authorities, housing authorities, housing societies, co-operative societies, public and private real estate projects, joint ventures, private commercial concerns and property registrars.
Advance tax on property sales adjustable
Under Section 236C(2), the advance tax collected from sellers is adjustable against their income tax liability.
However, where a property is acquired and subsequently sold within the same tax year, the tax collected under this section becomes minimum tax.
Exemption for government allottees and ex-servicemen
The ordinance provides an exemption from advance tax collection on the first sale of certain properties allotted by the Federal or Provincial Government.
The exemption covers specified dependants of martyrs belonging to the Pakistan Armed Forces, individuals who died while serving in the armed forces or Federal or Provincial Government, and war-wounded personnel.
It also covers serving and retired armed forces personnel and serving or former government employees, subject to the prescribed conditions.
The property must have been acquired or allotted by the government or an authorised authority in recognition of services rendered. The official allotment authority must certify the eligibility.
Relief for overseas Pakistanis
Section 236C also provides special treatment for non-resident individuals holding a Pakistan Origin Card (POC), National Identity Card for Overseas Pakistanis (NICOP) or Computerised National Identity Card (CNIC).
The provision applies where the individual acquired the property through a Foreign Currency Value Account (FCVA) or Non-Resident Rupee Value Account (NRVA) maintained with an authorised bank in Pakistan under State Bank of Pakistan foreign exchange regulations.
In such cases, tax collected under Section 236C constitutes the final discharge of the seller’s tax liability in respect of capital gains taxable under Section 37 on the disposal of that property.
Section 7E tax clearance mandatory
The FBR has also maintained a requirement under Section 236C(2A) concerning tax on deemed income under Section 7E.
A person responsible for registering, recording or attesting a property transfer cannot complete the transaction unless the seller or transferor has discharged the applicable Section 7E tax liability and provided evidence in the prescribed mode, form and manner.
The requirement applies notwithstanding anything contained in any other law.
These provisions establish the advance tax collection framework for property sellers during Tax Year 2027, while specifying exemptions and compliance requirements for particular categories of taxpayers.