Section 7E — Tax on Deemed Income from Immovable Property

Section 7E imposes income tax on 'deemed income' from immovable property — calculated as 5% of FBR-notified value above PKR 25 million, then taxed at 1%. Effective rate: 0.05% of FBR value annually. Applies to all Pakistani resident persons holding immovable property above the threshold, regardless of whether the property generates actual rental income.

The section has been controversial since introduction. Property owners challenged it in the Lahore High Court and Sindh High Court arguing that taxing 'deemed' (non-existent) income violates Article 38 of the Constitution and conflates wealth tax (provincial subject under Entry 50 of the Federal List) with income tax (federal subject). Courts have issued conflicting judgments; the matter has been escalated to the Supreme Court.

Pending judicial resolution, FBR continues to collect Section 7E. Property owners above the PKR 25M threshold should declare the deemed income and pay the 1% tax (typically a few hundred thousand rupees annually for a PKR 100M property) to avoid default surcharge. Maintain bank evidence and FBR challans. Section 7E is separate from Section 236C (sale WHT), Section 236K (purchase WHT), Section 155 (rent WHT), and Section 37(1A) (CGT).