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Adjustment of expenses allowed against property income

ISLAMABAD: The Federal Board of Revenue (FBR) has said that adjustment of expenses on property income has been allowed if a taxpayer opted to pay income tax under the head of individual income.

Sources in FBR said that through Finance Act, 2016, a dual tax treatment was introduced for property income of individuals/A0Ps and companies.

Individuals and AOPs had to pay fixed amount of tax on gross rentals at the rates specified in Division VIA of Part-I of First Schedule.

However, certain deductions were allowable for computing property income in case of a company.

A new sub-section (7) was added to Section 15A through Finance Act, 2019 to enable Individuals/A0Ps to opt for normal tax regime and claim deductions against gross rentals as provided in the law.

But that option was available only to those individuals and AOPs who derived income from property in excess of Rs.4 million.

The Finance Act, 2020 has removed this condition by making amendment in sub-section 7 of section 15A.

Now all individuals/A0Ps are allowed to claim deductions against gross rental income if they opt to pay tax at rates given in Divisions I of Part-I of First schedule to the Ordinance.

Furthermore, deduction in respect of administration and collection charges under clause (h) of Section 15A has been reduced from 6% to 4% of the rent chargeable to tax.