Pakistan Federal Constitutional Court Finds Tax on Deemed Rental Income is Unconstitutional

The Federal Constitutional Court issued a Short Order on 7 May 2026, finding that the tax on deemed rental income under Section 7E of the Income Tax Ordinance 2001 is unconstitutional. Section 7E was introduced by the Finance Act 2022, imposing tax on deemed rental income of residents that own immovable property with a fair market value exceeding PKR 25 million, with the rate equal to 20% on 5% of the fair market value, with certain exclusions. The short order addressed over 200 cases involv…