In a significant judicial development, the Federal Constitutional Court of Pakistan has officially declared Section 7E of the Income Tax Ordinance, 2001, to be ultra vires the Constitution. This short order, announced in Islamabad on May 7, 2026, effectively strikes down the “deemed income” tax on immovable property, declaring it void ab initio. The Court’s decision successfully resolves a period of legal ambiguity, as it allowed the appeals filed by taxpayers against previous unfavorable judgments from the Sindh and Lahore High Courts. Simultaneously, the Court dismissed the appeals filed by the FBR and Commissioner Inland Revenue against the Peshawar and Baluchistan High Courts, which had already moved to invalidate the provision.
As a result of this ruling, all notices, proceedings, and enforcement actions previously initiated by the FBR under Section 7E are now set aside and declared to be without lawful authority. This judgment provides immediate relief to property owners across the country, as the judiciary has deemed the insertion of this provision through the Finance Act of 2022 to be unconstitutional. While the detailed reasons for this landmark decision are to be recorded separately, the immediate effect is a total halt to the collection and enforcement of tax under this specific section.