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FCC declares Section 7E Property Tax unconstitutional, strikes down ... ISLAMABAD: In a landmark judgment with major implications for taxpayers and the real estate sector, the Federal Constitutional Court (FCC) has unanimously struck down Section 7E of the Income Tax Ordinance, 2001, declaring the controversial property tax unconstitutional and void from the very beginning. Chief Justice Amin-ud-Din Khan, along with Justice Ali Baqar Najafi, announced the short order in Islamabad, ending years of legal uncertainty surrounding the deemed income tax imposed on immovable properties through the Finance Act 2022. Section 7E had introduced a deemed rental income tax on immovable properties, allowing tax authorities to impose income tax on property owners even if the property generated no actual rental income. The provision faced strong opposition from taxpayers, legal experts and business groups across Pakistan. The levy triggered constitutional challenges in multiple High Courts, with petitioners arguing that the government could not impose income tax on unrealized or hypothetical income. The tax was widely criticized for impacting salaried individuals, retirees, inherited property …

FCC issues detailed verdict striking down Income Tax Ordinance ISLAMABAD: The Federal Constitutional Court issued a detailed 92-page judgement on Tuesday declaring Section 7E of the Income Tax Ordinance unconstitutional, ruling that parliament cannot levy taxes on immovable property or construct taxes based on hypothetical earnings. The landmark judgment, authored by FCC Chief Justice Aminuddin Khan, provides the detailed legal reasoning behind the court’s earlier May 7 short order that struck down the controversial tax provision. “A tax can be levied for any public purpose, and the burden of such taxation is borne collectively by the public,” the court observed, clarifying that the validity of a tax does not depend on a direct benefit returning to the taxpayer. “The role of the court is strictly to evaluate the constitutional legitimacy of a tax levy, not its underlying objectives. A law is struck down only when it violates fundamental rights or falls outside the legislative competence of the enacting body.” The constitutional court ruled that Section 7E, which imposed a 5 per cent tax on the value of immovable property regardless of whether it generated actual income, was es…

FCC Declares Section 7E Property Tax Unconstitutional, Strikes Down ... Share on Facebook Share on X (Twitter) Share on LinkedIn Share on Pinterest Share on Reddit Share on Hacker News ISLAMABAD: In a landmark judgment with major implications for taxpayers and the real estate sector, the Federal Constitutional Court (FCC) has unanimously struck down Section 7E of the Income Tax Ordinance, 2001, declaring the controversial property tax unconstitutional and void from the very beginning. Chief Justice Amin-ud-Din Khan, along with Justice Ali Baqar Najafi, announced the short order in Islamabad, ending years of legal uncertainty surrounding the deemed income tax imposed on immovable properties through the Finance Act 2022. Section 7E had introduced a deemed rental income tax on immovable properties, allowing tax authorities to impose income tax on property owners even if the property generated no actual rental income. The provision faced strong opposition from taxpayers, legal experts and business groups across Pakistan. The levy triggered constitutional challenges in multiple High Courts, with petitioners arguing that the government could not impose income tax on unrealized or hypoth…

High court suspends property tax collection in Islamabad <p>ISLAMABAD: The Islamabad High Court on Wednesday suspended the collection of property tax from residents of the federal capital, providing interim relief to taxpayers challenging the levy imposed by the Metropolitan Corporation Islamabad (MCI).</p> <p>A single bench of the IHC issued the order during the first hearing of a writ petition filed by Muhammad Munir Ahmed Chaudhary and Ahmed Hasan Rana, who also appeared as counsel for petitioner No. 1.</p> <p>The petitioners challenged Gazette Notification No. 404(1)-4/2024, dated March 14, 2024, and a subsequent property tax bill of Rs846,398 issued to them on April 24, 2026. The matter has now become a test case for thousands of property owners across the capital facing similar tax demands.</p> <p>During the proceedings, counsel for the petitioners argued that the imposition of property tax through the impugned notification was in direct violation of the Islamabad Capital Territory Local Government Act, 2015, and the Urban Immovable Property Tax Act, 1958.</p> <blockquote> <p>Court grants interim relief to taxpayers, issues notices to MCI, CDA and federal authorities</…

FCC rules income tax on immovable properties ‘confiscatory in nature’ <p>ISLAMABAD: The Federal Constitutio­nal Court (FCC) on Tuesday ruled that Section 7 E of the <a rel="noopener noreferrer" target="_blank" class="link--external" href="https://www.fbr.gov.pk/categ/income-tax-ordinance/326">Income Tax Ordinance (ITO) 2001 </a>was merely illusory since it was confiscatory in nature, imposed upon immovable properties, which neither generate income nor, in certain cases, are capable of generating any income.</p> <p>“The practical effect of such a levy is that a person owning a non-income-generating asset may be compelled to dispose of the asset to meet tax liability,” observed Chief Justice FCC Aminuddin Khan.</p> <p>The judgement came on the day when parliament was debating the finance bill 2026, which includes proposals to implement the May 7 short order in which the FCC had declared Section 7E ultra vires. This section, introduced through the Finance Act 2022, empowered authorities to charge tax on “deemed incomes” on assets and properties.</p> <p>The levy under section 7E operates in a discriminatory manner as it carves out exemptions in favour of certain classes of persons, th…

FCC issues its detailed judgment on Sec 7E of income tax law Print Print edition: 2026-06-17 FCC issues its detailed judgment on Sec 7E of income tax law Published June 17, 2026 Updated June 17, 2026 05:36am Save Saved 5 min comment Comments By Terence J Sigamony Add BRecorder as a trusted source on Google ISLAMABAD: The Federal Constitutional Court (FCC) held that Section 7E of the Income Tax Ordinance (ITO), 2001, is, in pith and substance, a tax on the capital value of immovable property. “The characterisation of the levy as one on ‘deemed income’ is merely illusory and does not withstand constitutional scrutiny. The provision, therefore, falls outside the legislative competence of the Federal Legislature,” said the 92-page judgment authored by Chief Justice Amin-ud-Din Khan. It further said that, consequently, any proceedings, actions, assessments, demands, or notices initiated or taken pursuant thereto shall stand annulled, being without lawful authority and jurisdiction. The respondents are restrained from giving effect to the impugned provision in any manner whatsoever. A two-member bench passed a short order on the matter on May 7, 2026 and announced its detailed reasons o…