Builders and developers operating under the Section 7F special tax regime face a significant liquidity burden. While Section 7F taxes them on a fixed percentage of gross receipts (10%–15%) as Income from Business, they are still hit by Section 236C advance tax during property transfers.

Since Section 236C is typically adjustable only against capital gains, these taxpayers often find their capital trapped with no other income to adjust it against. Legal Framework & Solution To resolve this, FBR Circular No. 07 of 2025-26 provides a clear path to relief.

Under Section 159 of the Income Tax Ordinance, eligible persons who have discharged their 7F liabilities can now apply to the Commissioner Inland Revenue for an exemption certificate. This certificate authorizes the non-collection of advance tax under Section 236C on immovable property transactions

This measure directly injects liquidity back into the construction sector by preventing unnecessary tax withholding. But this relief is not automatic; Commissioners must examine applications on a "case-by-case basis," which may lead to administrative bottlenecks. Industry experts appreciate this move for aligning tax collection with the actual nature of business income

However, some criticize the reliance on manual certificate issuance rather than an automated system. To benefit, ensure all Section 7F obligations are met before applying to your local tax office.

Download FBR SRO: Dowload FBR Circular: Circular No. 07 of 2025-26 IR-Policy | No. 1(19)S(ITP)/2026 | Islamabad, the 31st March, 2026| Clarification Regarding Applicability of Withholding Tax under Section 236C in Respect of Persons Covered under Section 7F of the Income Tax Ordinance, 2001