Pakistan’s Federal Board of Revenue (FBR) reported a 42% decline in income tax collection from builders and developers during fiscal year 2025, reflecting weaker activity in the construction sector, according to official data.
Total withholding income tax collected from builders and developers fell to Rs177 million in FY25, compared with Rs305 million in the previous year, the FBR said in its annual report.
The tax is collected under Section 7 of the Income Tax Ordinance, 2001, which covers advance income tax on construction and development businesses.
Breakdown of the data showed that collections under Section 7C, which applies to builders engaged in the sale of residential, commercial and other buildings, declined sharply to Rs44.64 million in FY25 from Rs82.61 million a year earlier.
Similarly, revenue from Section 7D, applicable to developers involved in the sale of residential, commercial and other plots, dropped to Rs132.71 million from Rs222.55 million in the previous fiscal year.
Tax officials attributed the decline to subdued activity in the construction sector, which has been under pressure from elevated input costs, including high prices of raw materials and overall economic slowdown.
Industry stakeholders have also pointed to rising financing costs and reduced private-sector investment as key factors weighing on new housing and commercial projects, further dampening tax flows from the sector.
The construction industry is considered a key driver of Pakistan’s economic growth, with strong linkages to employment and allied industries such as cement, steel and services.
Analysts say sustained weakness in the sector could have broader implications for economic recovery unless construction activity picks up through policy support, lower interest rates or improved business confidence.
The FBR data highlights ongoing challenges in widening the tax base while maintaining growth in key revenue-generating sectors.