Many buyers are unaware that property or goods purchased through auction in Pakistan are subject to income tax. Under Section 236A of the Income Tax Ordinance, 2001, the Federal Board of Revenue (FBR) mandates the collection of advance tax at the time of sale by auction for tax year 2026.
Whether you are bidding on immovable property, confiscated goods, vehicles, or government assets, understanding these tax rules can help you avoid surprises.
What Is Section 236A of the Income Tax Ordinance?
Section 236A applies to sales made through public auction or tender, regardless of whether the property or goods belong to:
• Federal or provincial government
• Local authorities
• Companies or foreign associations
• Customs authorities or tax departments
• Pakistan Railways or other public bodies
This provision also covers confiscated or attached goods.
👉 Important: Even renewal of a license previously sold through auction is treated as a taxable auction sale.
Who Collects the Tax?
The auctioneer or the authority conducting the auction is legally required to collect advance tax from the buyer at the time of sale.
If payment is made in installments, tax is collected with each installment.
Auction Tax Rates for Tax Year 2026
📌 Standard Rate
• 10% of the gross sale price
Applies to:
• Movable goods
• Confiscated assets
• Commercial auctioned items
📌 Reduced Rate
• 5% of the gross sale price
Applies to:
• Immovable property sold through auction
• Train management services auctioned by Pakistan Railways
Higher Tax for Non-Filers (Non-ATL Persons)
If your name does not appear on the Active Taxpayers List (ATL) at the time of auction:
🚨 The applicable tax rate is increased by 100%
That means:
• 10% becomes 20%
• 5% becomes 10%
👉 Tip: Filing your income tax return and becoming an ATL filer can cut your auction tax liability in half.
Is This Tax Adjustable or Final?
• Generally adjustable:
Tax collected under Section 236A can be adjusted against your annual income tax liability.
• Final tax exception:
Tax collected on a lease of the right to collect tolls, fees, or levies is treated as final tax, meaning no adjustment or refund is allowed.
What Counts as “Property” Under Section 236A?
The law broadly defines property and includes:
• Land and buildings
• Lease rights
• Auctioned licenses
• Rights to collect tolls or fees
• Any goods sold via public auction or tender
Key Takeaways for Auction Buyers in 2026
✔ Auction purchases are not tax-free
✔ Advance tax is collected at source
✔ ATL status significantly reduces tax burden
✔ Installment payments attract tax per installment
✔ Some auction taxes are adjustable, others are final
Disclaimer: This article is for general informational purposes only and does not constitute legal or tax advice. Tax laws and rates may change or vary based on individual circumstances. Readers should consult the Federal Board of Revenue (FBR) or a qualified tax professional before making any financial or tax-related decisions.