Understanding Section 7E: Deemed Income on Capital Assets in Pakistan (Updated for 2025)
What Is Section 7E and Why Does It Matter?
Section 7E (introduced by the Finance Act, 2022) imposes taxes on “deemed income” from capital assets, primarily immovable property such as buildings and land, even if they are not rented out. The formula is as follows: • Five percent of the FBR-reported fair market value (FMV) is deemed income.
The tax rate is 20% of that deemed income, meaning that FMV is effectively taxed at 1%.
Key Updates & Developments for 2025
- Possible Elimination of Section 7E
The FBR has indicated plans to repeal Section 7E to encourage real estate investment and simplify compliance, particularly in response to feedback from the FPCCI and tax associations. There are positive indications of change,
even though nothing is final yet. - Changes Enacted via Finance Act, 2023
o Tax now applies only if the taxpayer is listed in the Active Taxpayers List (ATL). Non-ATL persons are not chargeable, except where return filing is mandatory under Tenth Schedule.
o The retrospective applicability was reduced from 5 to 3 years.
o Advance tax on property transfer was increased to 3% for ATL filers, and up to 10.5% for non-filers.
Who Falls Under Section 7E?
Tax applies only if all these are true:
• You’re a resident person.
• You own capital assets in Pakistan (like land or buildings).
• These assets’ aggregate FMV exceeds PKR 25 million as of June 30.
• You’re on the Active Taxpayers List (ATL).
Not Chargeable? Here Are the Exemptions
You won’t owe deemed income tax if any apply:
• Own only one capital asset.
• Property is your business premises, and you’ve been an ATL filer at any time during the year.
• Self-owned agricultural land used for farming (excluding farmhouses).
• Property full taxed already under other provisions.
• Capital asset acquired in first tax year and 236K tax was paid.
• Combined FMV (excluding exempt assets) ≤ PKR 25 million.
• Owned by government, local authority, or developers registered with the Designated Non-Financial Businesses authority.
• Non-ATL individuals except those required to file under Tenth Schedule.
Do You Still Need to File a 7E Declaration?
Yes. Whether or not tax is payable, you must declare:
• Details of capital assets,
• FMV,
• Computed deemed income,
• Any exemptions?
This is submitted along with your income tax return on FBR’s IRIS portal. Courts have upheld the requirement even amid legal challenges.
Examples of 2025 Scenarios: FMV ATL Filer Tax Due?
Own a single property valued at PKR 30 million.Yes or no (excluding a single asset)
Two properties valued at PKR 20M and 28M–48MYes, only one asset (28 million) is subject to tax.
35 million dollars’ worth of agricultural landYes or no (exemption for agriculture)
Tax on the $30 million in rental income from the property has already been paid.Yes or no (tax paid under other provisions)
Why This All Matters
• Encourages real estate investment and prevents idle land hoarding.
• Brings Pakistan into compliance with international financial and tax standards; • Encourages transparency in property ownership.
What You Need to Do
Verify whether your total assets (FMV) are more than PKR 25 million.
2. Check to see if the list of current taxpayers includes your name.
3. Use IRIS to submit a 7E declaration, even if you are exempt.
4. On the IRIS form, clearly indicate any applicable exemptions.
5. Keep yourself updated because the FBR may soon repeal or alter Section 7E.
Are you in need of help?
Section 7E declarations, IRIS filings, exemption identification, and FBR compliance and updates are only some of the activities that Corptax Solutions can assist with.
For instant help, check out CorptaxSolutions.com or WhatsApp us.
Pakistan’s property taxes are made complex by Section 7E, but you can remain compliant, not pay additional taxes upfront, be aware of your exemptions, and get your taxes right if you prepare.