The debate over Section 7E of the Income Tax Ordinance, 2001 has intensified, with the Pakistan Tax Bar Association (PTBA) urging the Federal Board of Revenue (FBR) to immediately stop what it calls selective enforcement of the law. According to the association, the current approach has created unequal treatment of property owners across different regions of Pakistan.
In its communication to the FBR, the PTBA revealed that tax practitioners in Punjab and Sindh have reported an increasing number of notices being issued to taxpayers under Section 7E. Meanwhile, property owners in Islamabad, Khyber Pakhtunkhwa, and Balochistan are largely unaffected, as enforcement actions in these areas have reportedly been suspended or avoided altogether.
Introduced through the Finance Act 2022, Section 7E imposes tax on notional income from immovable property. Rather than relying on actual rental earnings, the tax is calculated at one percent of the property’s fair market value, a feature that has made the provision controversial since its inception.
The legal status of Section 7E remains uncertain due to conflicting court decisions. The Sindh High Court upheld the provision, while the Islamabad, Peshawar, and Balochistan High Courts struck it down, ruling that it violated constitutional principles. Although these rulings were challenged, the Supreme Court did not issue any stay orders, allowing the judgments to remain effective in their respective jurisdictions. Following the 27th Constitutional Amendment, the matter has now been transferred to the Federal Constitutional Court, where it awaits final determination.
This legal uncertainty has resulted in an uneven tax environment. In some parts of the country, taxpayers are not being charged under Section 7E at all, while in others, enforcement continues as usual. The PTBA has argued that this situation is incompatible with the nature of income tax, which is a federal tax meant to apply uniformly across Pakistan.
Calling for corrective action, the PTBA has urged the FBR to ensure equal treatment of all taxpayers until the matter is conclusively settled by the courts. The association warned that selective enforcement erodes trust in tax administration and creates confusion among both taxpayers and professionals.
As the case remains pending, the PTBA continues to press for fairness, consistency, and constitutional compliance, stressing that tax laws should be enforced evenly and transparently nationwide.