Is the 7E deemed income tax on a second property still payable?

Section 7E of the Income Tax Ordinance, 2001 was the charge people called the “deemed income” or “second property” tax. It no longer appears in the Ordinance as amended to 30 June 2026. This page sets out what the Finance Act, 2026 did, what 7E used to charge, and the loose end the consolidated text leaves.

A note on reading the official text: in this site’s copy of the Ordinance, the heading “7E” sits over an unrelated banking rule on low cost housing advances, which comes from a Schedule. The real section 7E appears only as a footnote recording its omission. This page therefore cites it by label rather than by section number.

What did the Finance Act, 2026 change?

Section 5 of the Finance Act, 2026 made two amendments that together remove the charge:

• In the body of the Ordinance: “(4) section 7E shall be omitted;”
• In the First Schedule, Part I: “(v) Division VIIIC shall be omitted; and”

Division VIIIC was the rate table for 7E. Its omitted text, reproduced in the consolidated Ordinance, read: “The rate of tax under section 7E shall be 20%.” Section 1 of the Finance Act, 2026 says the Act comes into force on 1 July 2026 unless it provides otherwise. Tax year 2027 covers 1 July 2026 to 30 June 2027, so the Ordinance for that year has no 7E charge and no 7E rate.

What did section 7E charge while it applied?

The omitted text begins: “For tax year 2022 and onwards, a tax shall be imposed at the rates specified in Division VIIIC”. Sub-section (2) treated a resident person as having income equal to five percent of the fair market value of capital assets situated in Pakistan held on the last day of the tax year. At the 20% rate, that is 1% of the value of the assets caught.

The omitted sub-section (2) excluded:

Clause	Excluded from 7E
(a)	One capital asset owned by the resident person
(b)	Self-owned business premises used by a person on the active taxpayers’ list
(c)	Self-owned agricultural land under cultivation, excluding a farmhouse and land annexed to it
(d)	Assets allotted to Shaheeds and their dependants, those who died or were war wounded in service, and serving or former armed forces and government personnel as original allottees
(e)	Any property from which income is chargeable to tax and the tax is paid
(f)	An asset in its first tax year of acquisition where tax under section 236K was paid
(g)	The remaining assets, where their fair market value in aggregate did not exceed Rs. 25 million
(h), (i)	Assets of provincial and local governments, and of certain authorities, builders and developers registered with the Directorate General of Designated Non-Financial Businesses and Professions

A proviso said exclusions (a), (e), (f) and (g) did not apply to a person not appearing in the active taxpayers’ list, with a narrow exception for people not required to file. “Capital asset” excluded stock-in-trade, shares and securities, depreciable business property and movable assets.

Worked example (illustrative figures)

This shows how 7E worked for a tax year when it was in force. It does not apply for tax year 2027.

Saima lives in Faisalabad and is on the active taxpayers’ list. On the last day of the tax year she owned:

1. The house she lives in: excluded under clause (a) as her one capital asset.
2. A flat let to a tenant, with the rent declared and taxed: excluded under clause (e).
3. An open plot in a housing scheme, fair market value Rs. 18,000,000.
4. A second open plot, fair market value Rs. 12,000,000.

Step 1: Aggregate value of the remaining assets = Rs. 18,000,000 + Rs. 12,000,000 = Rs. 30,000,000. This exceeds Rs. 25 million, so clause (g) does not exclude them.

Step 2: Deemed income = 5% x Rs. 30,000,000 = Rs. 1,500,000.

Step 3: Tax at 20% = Rs. 1,500,000 x 20% = Rs. 300,000.

Had the two plots been worth Rs. 24,000,000 together, clause (g) would have excluded them and the 7E tax would have been nil. For tax year 2027 the answer is nil in both cases, because the charge is gone.

What about the tax years before 2027?

The omission took effect with the Finance Act, 2026. Neither the consolidated Ordinance nor section 5 of the Finance Act, 2026, as held in this corpus, contains a transitional rule saying whether 7E liability for tax years 2022 to 2026 continues, is waived, or is still recoverable. The law we hold is silent on this, so this page does not answer it.

Does section 236C(2A) still require 7E clearance on sale?

Section 236C(2A) was inserted by the Finance Act, 2023. As printed in the Ordinance amended to 30 June 2026, it says the registering person shall not register, record or attest a transfer “unless the seller or transferor has discharged its tax liability under section 7E”. The Finance Act, 2026 omitted section 7E but did not, in the text we hold, amend or omit sub-section (2A). Its opening words (“Subject to sub-section (2A)”) also remain in section 236C(1). How a registering office applies (2A) after 1 July 2026 is not stated in the Ordinance.

Common mistakes

• Treating the 7E rate as 20% of the property’s value. The 20% applied to deemed income of 5% of value, so the effective charge was 1% of value.
• Assuming 7E covered every second property. Rented property on which tax was paid, and a first-year purchase that suffered 236K, were excluded, as were holdings of Rs. 25 million or less in aggregate after the other exclusions.
• Mixing up 7E with 236C and 236K. Those two advance taxes on sale and purchase continue. The Finance Act, 2026 changed their rates, not their existence.
• Reading the “7E” heading on this site as the deemed income section. That heading holds a banking rule. The deemed income text is in the omission footnote.

What to check in the official text

Read section 5 of the Finance Act, 2026, clauses (4) and (44)(a)(v), and the footnotes to section 7E and Division VIIIC in the consolidated Ordinance, which reproduce the omitted wording. Read section 236C(2A) together with those footnotes. Any notification or later amendment dealing with sub-section (2A) or with 7E liabilities for earlier years is not in this corpus. Provincial property taxes and stamp duty are separate provincial levies and are not covered here.