Constitutional Court Strikes Down One Percent Property Income Tax

The Federal Constitutional Court declared Section 7E of the Income Tax Ordinance unconstitutional and struck it down permanently. The law imposed a one percent income tax on plots and immovable properties. Therefore, the ruling has provided major relief to property owners and taxpayers across Pakistan.

A constitutional bench led by Chief Justice Aminuddin Khan issued the short verdict. The court ruled that Section 7E, added through the Finance Act 2022, violated constitutional principles. Consequently, the court declared the provision void from the very beginning.

The court stated that simple ownership of a property or plot could not legally be treated as income. Moreover, it said the government could not impose income tax merely because a person owned immovable property. As a result, the judges rejected the legal basis of the disputed tax section.

The ruling also declared all actions taken under Section 7E illegal and unjustified. Furthermore, the court canceled notices, proceedings, and enforcement measures issued by the Federal Board of Revenue and Inland Revenue commissioners under the same provision.

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Under Section 7E, authorities treated five percent of a property’s market value as assumed income. They then imposed a twenty percent tax on that estimated amount. In practical terms, the tax became equal to one percent of the total market value of the property.

Legal experts described the judgment as an important constitutional precedent for future tax laws. At the same time, property owners welcomed the decision as a major financial relief. Therefore, the Federal Constitutional Court ruling against the one percent property income tax is expected to influence future taxation policies in Pakistan.