Islamabad: Federal Board of Revenue (FBR) has recorded a sharp 42% decline in income tax collection from builders and developers during fiscal year 2024–25, signaling continued weakness in Pakistan’s construction sector.
According to official figures released in the FBR’s annual report, total withholding income tax collected from the sector dropped to Rs177 million in FY25, compared to Rs305 million in the previous fiscal year.
The tax is collected under Section 7 of the Income Tax Ordinance, 2001, which governs advance income tax on construction and development activities.
A detailed breakdown shows that revenue under Section 7C—applicable to builders involved in the sale of residential, commercial, and other buildings—fell significantly to Rs44.64 million in FY25 from Rs82.61 million a year earlier.
Likewise, collections under Section 7D—covering developers engaged in the sale of residential, commercial, and other plots—declined to Rs132.71 million, down from Rs222.55 million in the previous fiscal year.
Tax authorities attributed the decline primarily to subdued construction activity, driven by rising input costs, including higher prices of raw materials, alongside an overall economic slowdown.
Industry stakeholders also highlighted increasing financing costs and reduced private-sector investment as major challenges, which have slowed down new housing and commercial developments, ultimately impacting tax revenues.
The construction sector remains a vital pillar of Pakistan’s economy, given its strong linkages with employment and allied industries such as cement, steel, and services.
Experts warn that prolonged weakness in the sector could hinder broader economic recovery unless supported by favorable policies, lower interest rates, and improved investor confidence.
The latest FBR data underscores the persistent challenge of expanding the tax base while sustaining revenue growth from key economic sectors.