The Government of Pakistan has introduced significant changes to the advance tax regime on immovable property transactions through the Finance Act, 2026, by amending Section 236C and Section 236K of the Income Tax Ordinance, 2001.
These amendments simplify the tax structure, abolish the previous slab-based rates, and reinforce the distinction between filers and non-filers. The revised rates are applicable for Tax Year 2027.
If you are planning to buy or sell property in Pakistan, understanding these changes is essential to estimate your tax liability accurately.
What is Section 236C?
Section 236C of the Income Tax Ordinance, 2001 requires the collection of advance income tax from the seller at the time of the sale or transfer of immovable property.
This tax is generally adjustable against the seller’s final income tax liability, subject to the applicable provisions of the law.
New Rates Under Section 236C (Tax Year 2027)
| Status | Advance Tax Rate |
| Filer | 2.75% |
| Non-Filer | 5.5% |
The tax is calculated on the gross consideration (sale value) received by the seller.
Example
Suppose a property is sold for PKR 20,000,000.
- Filer: 2.75% × 20,000,000 = PKR 550,000
- Non-Filer: 5.5% × 20,000,000 = PKR 1,100,000
A non-filer pays double the advance tax compared to a filer.
What is Section 236K?
Section 236K requires the collection of advance income tax from the purchaser at the time of purchasing or acquiring immovable property.
Unlike Section 236C, this tax is calculated on the Fair Market Value (FMV) of the property as determined under the applicable tax laws.
New Rates Under Section 236K (Tax Year 2027)
| Status | Advance Tax Rate |
| Filer | 1.25% |
| Non-Filer | 2.5% |
The tax is charged on the Fair Market Value (FMV) of the property.
Example
If the Fair Market Value of a property is PKR 20,000,000:
- Filer: 1.25% × 20,000,000 = PKR 250,000
- Non-Filer: 2.5% × 20,000,000 = PKR 500,000
Again, a non-filer pays twice the amount payable by a filer.
What Has Changed in Tax Year 2027?
Major Change: Enhanced Non-ATL Rates Abolished for Tax Year 2027
One of the most significant reforms introduced through the Finance Act, 2026 is the abolition of the enhanced advance tax rates that previously applied to persons not appearing on the Active Taxpayers List (ATL).
Under the previous law, non-ATL persons were subject to substantially higher advance tax rates on immovable property transactions under Sections 236C and 236K. These punitive rates were introduced to encourage tax compliance but often resulted in a significantly higher tax burden for non-filers.
Previous Position (Before Tax Year 2027)
Section 236C – Sale of Immovable Property
| Status | Previous Rate |
| Filer | 4.5% to 5.5% (slab-based) |
| Person not appearing on ATL | 11.5% |
Section 236K – Purchase of Immovable Property
| Fair Market Value | Rate for Person not appearing on ATL |
| Up to PKR 50 million | 10.5% |
| Above PKR 50 million up to PKR 100 million | 14.5% |
| Above PKR 100 million | 18.5% |
These rates imposed a substantial additional cost on persons not appearing on the Active Taxpayers List.
Position After the Finance Act, 2026 (Tax Year 2027)
The Finance Act, 2026 has abolished the above enhanced non-ATL rates. From Tax Year 2027, the advance tax under Sections 236C and 236K is no longer determined based on the previous high-rate regime for persons not appearing on the ATL.
Instead, only the following rates now apply:
| Section | Filer | Non-Filer |
| 236C (Seller) | 2.75% | 5.5% |
| 236K (Buyer) | 1.25% | 2.5% |
This amendment removes the earlier punitive rates of 11.5%, 10.5%, 14.5%, and 18.5%, replacing them with a much simpler and more predictable tax structure. While non-filers continue to pay higher advance tax than filers, the exceptionally high rates previously applicable to persons not appearing on the Active Taxpayers List are no longer applicable for Tax Year 2027.
How DOAT Can Help
Property transactions involve much more than paying advance tax. Proper tax planning and compliance can save both time and money.
At DOAT, we assist individuals, investors, builders, developers, and businesses with:
- Income Tax Return Filing
- Active Taxpayer List (ATL) Compliance
- Tax Planning for Property Transactions
- Advance Tax Calculations
- Property Tax Advisory
- Capital Gains Tax Guidance
- FBR Compliance and Documentation
- Corporate and Tax Consultancy
Whether you are buying or selling property, our experts can help you understand your tax obligations and ensure compliance with the Income Tax Ordinance, 2001.
Final Thoughts
The Finance Act, 2026 has simplified the advance tax mechanism under Sections 236C and 236K by replacing the earlier slab-based system with straightforward filer and non-filer rates.
For Tax Year 2027, sellers who are filers will pay 2.75% under Section 236C, while non-filers will pay 5.5%. Buyers who are filers will pay 1.25% under Section 236K, whereas non-filers will pay 2.5%.
These amendments reinforce the government’s policy of encouraging tax compliance while making the taxation of property transactions easier to understand.
If you are planning to purchase or sell immovable property and need professional tax assistance, DOAT is here to help you navigate the process with confidence.