Property Tax Just Got Simpler: The New 236C and 236K Rates Under the Finance Act 2026
For three years, working out the advance tax on a property deal in Pakistan meant juggling your filer status, the property’s value band, and a separate rate for sellers and buyers. The Finance Act 2026 throws that whole grid out. In its place sit two flat numbers: 2.75% for the seller, 1.25% for the buyer. Here is what changed, who gains, and the calculations you can run on your own deal.
The two sections in plain language
Two provisions of the Income Tax Ordinance, 2001 sit on either side of every property transfer:
- Section 236C collects advance tax from the seller at the time of transfer. The registering authority deducts it before the deal is recorded.
- Section 236K collects advance tax from the buyer at the same moment.
The sections themselves were not rewritten. What the Finance Act 2026 rewrote is the rate attached to each, which lives in the First Schedule: Division X for 236C and Division XVIII for 236K.
What actually changed
The Act substitutes both Divisions with a single sentence each:
- Division X (236C): the rate to be collected from the seller is 2.75% of the gross amount of the consideration received.
- Division XVIII (236K): the rate to be collected from the buyer is 1.25% of the fair market value of the property.
Read those two lines carefully, because they delete three things at once:
- The value slabs are gone. No more separate rates for property up to Rs 50 million, Rs 50–100 million, and above Rs 100 million. One rate covers a Rs 5 million flat and a Rs 500 million tower alike.
- The three-tier rate card is gone from these Divisions. Filer, late filer and non-filer no longer carry different rates inside Division X and XVIII. The text gives one rate.
- The seller’s burden drops sharply. Sellers had been carrying the heavier load since the 2025 budget. The flat 2.75% pulls that back.
Before and after, side by side
The old rates (under the Finance Act 2025, which governed Tax Year 2026, i.e. up to 30th June 2026) were tiered by value and filer status. The table below shows the active filer rates that applied then against the flat rate that applies now. Non-filer and late-filer rates under the old regime ran far higher, which is the next point we cover.
Section 236C — the seller
| Property value | Old rate (till 30 June 2026) | New rate (from 1 July 2026) | Direction |
|---|---|---|---|
| Up to Rs 50 million | 4.5% | 2.75% | Down |
| Rs 50m – Rs 100m | 5% | 2.75% | Down |
| Above Rs 100 million | 5.5% | 2.75% | Down |
Section 236K — the buyer
| Property value | Old rate (till 30 June 2026) | New rate (from 1 July 2026) | Direction |
|---|---|---|---|
| Up to Rs 50 million | 1.5% | 1.25% | Down |
| Rs 50m – Rs 100m | 2% | 1.25% | Down |
| Above Rs 100 million | 2.5% | 1.25% | Down |
What happens to non-filers?
This is the question every property dealer will ask, and the honest answer needs care. The flat rates sit inside Division X and XVIII without a non-filer column. But the non-filer story has already moved off the rate card and onto the eligibility rules. Under the Section 114C regime introduced in the 2025 budget, a person who is not on the Active Taxpayers’ List, and who does not qualify under the exemptions, is barred from registering a property purchase above the prescribed threshold. The penalty for sitting outside the system is no longer “pay 18.5%.” It is closer to “you cannot complete the deal.”
So the practical filer message is unchanged, only sharper: be on the ATL and have your eligibility in order before you transact. The rate relief in this Act is written for compliant taxpayers who can actually use it.
The change nobody is connecting to property: 7E has been repealed
Here is the part a careful reader will appreciate. The same Finance Act 2026 omits Section 7E, the deemed-income tax on immovable property. For three years, selling a property meant clearing the 7E hurdle first, producing a certificate or payment to satisfy the registrar that the deemed-income tax on the property had been dealt with. That friction slowed and complicated countless transfers. The repeal also follows a Federal Constitutional Court ruling that held tax could not be imposed on notional or deemed income in the absence of any real accrual, so this was not a discretionary giveaway. It closed a provision the courts had already found constitutionally shaky.
With 7E gone, that pre-condition falls away entirely. A lower 236C and the death of 7E landed in the same Act, and together they make a sale meaningfully cheaper and meaningfully quicker to close. If you advise sellers, this pairing is the headline, not either change on its own.
Worked examples
Example 1 — Selling a DHA plot (236C relief)
Mr. Khan, an active filer, sells a residential plot in Lahore for Rs 40,000,000.
Old rate: 4.5% of 40,000,000 = Rs 1,800,000 New rate: 2.75% of 40,000,000 = Rs 1,100,000He keeps Rs 700,000 more from the same sale.
Example 2 — A high-value commercial sale (where the cut bites hardest)
A filer sells a commercial property for Rs 150,000,000. Under the old regime this fell in the “above Rs 100 million” band at 5.5%.
Old rate: 5.5% of 150,000,000 = Rs 8,250,000 New rate: 2.75% of 150,000,000 = Rs 4,125,000A saving of Rs 4,125,000 on advance tax alone. Flattening the slabs helps the large seller most.
Example 3 — Buying a house (236K relief)
A filer buys a property with an FBR fair market value of Rs 80,000,000. Under the old regime the Rs 50–100 million band charged 2%.
Old rate: 2% of 80,000,000 = Rs 1,600,000 New rate: 1.25% of 80,000,000 = Rs 1,000,000The buyer’s upfront cost drops by Rs 600,000.
Example 4 — The full transaction (both sides, one deal)
A property changes hands at Rs 60,000,000, both parties filers. Look at the combined advance tax FBR collects on the transfer.
OLD REGIME (till 30 June 2026) Seller 236C @ 5% = Rs 3,000,000 Buyer 236K @ 2% = Rs 1,200,000 Combined = Rs 4,200,000 NEW REGIME (from 1 July 2026) Seller 236C @ 2.75% = Rs 1,650,000 Buyer 236K @ 1.25% = Rs 750,000 Combined = Rs 2,400,000Rs 1,800,000 less locked up at the moment of transfer. That is liquidity the market gets to keep.
One thing that does not change: it is still adjustable
Both 236C and 236K remain advance, adjustable tax for filers. The amount deducted is not a final cost. It is credited against your annual income tax liability when you file your return, and any excess is refundable, provided you stay on the ATL and file properly.
For a seller, 236C is also set off against your capital gains tax on the disposal. If the property was bought and sold inside the same tax year, the advance tax interacts with the minimum-tax rules on that gain, so keep the purchase and sale documentation clean. Lower rates do not remove the need to file. They reward those who do.
For overseas Pakistanis
The facility built for non-resident Pakistanis continues to matter. A holder of a POC or NICOP can access the filer rate through the FBR portal’s Overseas Pakistanis route, and a non-resident can obtain an exemption certificate from the Commissioner by establishing non-resident status, with payment routed through the designated foreign-currency or non-resident rupee accounts. With the headline rates now lower and flat, that route becomes simpler to plan around, but the documentation discipline is the same.
What to do now that the new rates are in force
- Check your ATL status today. Every benefit in this Act is written for active filers, and the eligibility bar for buyers is real.
- Verify the rate actually applied on your deduction certificate. Registrars, housing societies and bank counters are still catching up with the new flat rates in the first weeks of the fiscal year. If a transfer registered on or after 1st July 2026 was charged at an old slab rate, that is an over-deduction, and it is recoverable, either through correction at source or as a refund when you file.
- Sellers: factor in the 7E repeal. The combination of a lower 236C and no 7E clearance is the real saving. Build both into how you price and time a transfer.
- Keep your valuation evidence. The buyer’s tax rides on FBR fair market value and the seller’s on consideration. Where these differ, document both so each side’s deduction is defensible.
- File to recover. These taxes are adjustable only for those who file. Do not leave a refund on the table.
Statutory references
- Section 236C, Income Tax Ordinance, 2001 — advance tax on sale or transfer of immovable property.
- Division X, Part IV, First Schedule (substituted by the Finance Act 2026) — 2.75% of gross consideration.
- Section 236K, Income Tax Ordinance, 2001 — advance tax on purchase of immovable property.
- Division XVIII, Part IV, First Schedule (substituted by the Finance Act 2026) — 1.25% of fair market value.
- Section 7E (omitted by the Finance Act 2026, following the Federal Constitutional Court’s ruling against taxing deemed/notional income) — repealed.
- Section 114C / Tenth Schedule — eligibility and non-ATL framework for property transactions.
Old FY 2025-26 rates shown for comparison are per the Finance Act 2025. Always verify the live rate card on the FBR portal.
Buying or selling property? Get the new rate right.
H.S. Advocate & Co. — Corporate & Tax Practice, Lahore. We handle property advance tax planning, 236C/236K adjustments and refunds, CGT computation, overseas-Pakistani exemptions and FBR representation.
Call 0344-4444703 · hsadvocate.com
This article explains provisions of the Finance Act 2026, now in force, and is for general information only. It is not legal or tax advice and does not create a lawyer-client relationship. The FBR may issue further rules or clarifications affecting how these sections apply in practice. For advice on a specific transaction, consult a qualified tax professional.