Chairman Hassan Bakhshi Presents Key Proposals to Simplify Property Taxation
Association of Builders and Developers (ABAD) Chairman Muhammad Hassan Bakhshi has presented a set of budget proposals to the government. He says long-term policy is critical for the real estate sector and must be developed through consultation with all stakeholders, including builders, developers, buyers, and allied industries.
Replace Section 7F With Area-Based Taxation
The government introduced a new tax under Section 7F last year. Under this regime, builders pay 10% on net income, while developers face 12.5% and 15% respectively on all receipts.
ABAD wants this replaced with the previous Section 100D, which taxed builders on a per-square-foot basis. Bakhshi argues that area-based taxation gives builders a clear, advance estimate of their tax liability regardless of project size. He says this will also close loopholes for corruption.
Remove Section 236C Tax on Business Income
ABAD is challenging the application of Section 236C, which is a Capital Gains Tax, on builders and developers. The council argues that property sales by builders constitute business income, not capital gains. Therefore, Section 236C should not apply to them. Similarly, sub-leasing of property should also be exempt from this tax.
Reduce Section 236K Advance Tax to 0.25%
Section 236K is an advance tax of 1.5% paid at the time of property purchase. Its purpose is to inform the government that a transaction has taken place.
ABAD proposes reducing this rate to 0.25%. Bakhshi points out that no value appreciation occurs at the time of purchase. A lower rate will still keep the government informed about property transactions without burdening buyers.
Restore Capital Gains Tax Exemption After Five Years
Previously, Capital Gains Tax (CGT) expired after five to ten years of property ownership. This encouraged people to hold onto properties. The government has since removed this exemption entirely.
Now, even a property sold after 50 years attracts CGT. ABAD wants the old law restored so that CGT is waived after five years of ownership.
Cap Rental Income Tax at 15%
ABAD wants more people to buy and rent out properties. However, excessive taxes on rental income are discouraging this.
Bakhshi notes that landlords currently create two separate agreements, one showing the actual rent and another showing a lower figure to reduce tax liability. He proposes that the government fix rental income tax at a flat 15%. This will bring more landlords into compliance and increase government tax revenue.
Broaden Tax Net Instead of Raising Tax Rates
ABAD warns that the overall tax burden on businesses is already too high. Tax rates have reached nearly 50%, and any further increase in the next budget will force businesses to shut down and drive away investment.
Bakhshi says the business community, chambers of commerce, trade associations, and even the IMF are all demanding the same thing: tax those who are not paying taxes rather than increasing the burden on existing taxpayers. He urges the government to reduce the load on compliant taxpayers and expand the tax net in Budget 2026-27.