By Ayesha Saba

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed a series of tax reforms for the federal budget FY2026-27 aimed at supporting Pakistan’s real estate and construction sectors, including lower transaction taxes, withdrawal of taxation on deemed income, and changes in taxation for builders and developers.

According to the FPCCI budget proposals document available with Wealth Pakistan, the business body stated that current tax structures have increased the financial burden on property transactions and reduced investment activity in the sector.

FPCCI proposed reducing withholding tax under Section 236C on the sale of immovable property to a uniform rate of 1% across all transaction values.

The chamber noted that the existing rate reaches as high as 5.5% on higher-value transactions and is applied on gross transaction value regardless of actual gain or loss.

Similarly, it recommended reducing advance tax under Section 236K on property purchases to a flat 1% rate and proposed abolishing advance tax on the first property purchase by a filer.

According to the organization, lower and more uniform rates could improve documentation of transactions, reduce incentives for under-reporting, and increase transparency in the market.

FPCCI also proposed abolishing the tax on deemed income under Section 7E.

The chamber maintained that the tax, introduced in FY2022, was based on deemed annual income from immovable properties rather than actual earnings and had discouraged investment in the real estate sector.

According to the document, the organization believes the taxation mechanism contributed to capital movement away from the sector and created additional uncertainty for investors.

The business body further called for withdrawal of Section 7F relating to taxation on builders and developers.

Under the current structure, taxable income of builders and developers is calculated at 10% of gross receipts from construction and sale activities irrespective of actual income levels.

FPCCI maintained that withdrawal of the provision could stimulate investment and generate economic activity in industries linked with construction, including cement, steel, transport, and labor markets.

The chamber emphasized that real estate and construction remain important drivers of economic activity because of their linkages with multiple allied industries and employment generation.

According to the proposals, a more balanced taxation structure could improve market activity and support broader economic growth.

Credit: INP-WealthPk