August 17, 2025 Islamabad, August 17, 2025 – The Federal Board of Revenue (FBR) has officially released the tax rate applicable to deemed property income for the tax year 2025–26, continuing the government’s policy of discouraging the use of idle assets and broadening the tax base. Under the recently updated Income Tax Ordinance, 2001, deemed property income is taxed at a flat rate of 20 percent under Section 7E. The amendment forms part of the government’s wider agenda to capture untaxed wealth and to bring underutilized real estate assets into the formal economy. What is “deemed income”? The concept of deemed income was introduced through the Finance Act 2022. It essentially assumes that individuals holding large and expensive properties are generating a notional or “deemed” return from those properties, even if they are not rented out. To ensure fairness, certain exemptions apply, but where applicable, the law treats five percent of the fair market value of property as taxable income. For example: • If a person owns urban land worth Rs. 100 million (excluding exemptions), the deemed income will be Rs. 5 million. • At the prescribed rate of 20 percent, the tax liability becomes Rs. 1 million. This approach discourages speculative property holding and encourages people to either utilize, rent, or dispose of non-productive assets. Exemptions under Section 7E Not every property falls under the deemed income regime. The law makes clear exclusions, such as: • One self-owned residential property. • Self-owned business premises of active taxpayers. • Agricultural land (excluding luxury farmhouses). • Properties allotted to martyrs’ families, war-wounded personnel, and certain government employees. • Properties where regular rental income is already taxed. • Properties valued collectively below Rs. 25 million. Why does this matter? 👉 For taxpayers: Those holding high-value plots, houses, or commercial properties need to carefully assess whether they fall under the deemed regime. Ignoring this provision may lead to heavy penalties. 👉 For property investors: Holding multiple properties purely for appreciation may no longer be tax…