Karachi, January 5, 2024 – The Federal Board of Revenue (FBR) has released the much-anticipated tax rates on rental income for the tax year 2024, outlining a progressive structure aimed at ensuring a fair and equitable taxation system.
The announcement, made under Section 155 of the Income Tax Ordinance, 2001, provides clarity for both individuals and entities dealing with immovable property.
The FBR’s decision takes into account the taxpayer’s status in the Active Taxpayers List (ATL) and those outside the list. The official documents highlight the following tax rates on rental income for individuals and Association of Persons (AOP):
1. Gross Rent up to Rs 300,000:
• ATL: 0% tax rate
• Non-ATL: 0% tax rate
2. Gross Rent between Rs 300,000 and Rs 600,000:
• ATL: 5% of the gross amount exceeding Rs 300,000
• Non-ATL: 100% increase in tax rate
3. Gross Rent between Rs 600,000 and Rs 2 million:
• ATL: Rs 15,000 plus 10% of the gross amount exceeding Rs 600,000
• Non-ATL: 100% increase in tax rate
4. Gross Rent exceeding Rs 2 million:
• ATL: Rs 155,000 plus 25% of the gross amount exceeding Rs 2 million
• Non-ATL: 100% increase in tax rate
This progressive structure aims to alleviate the tax burden on individuals with lower rental income while ensuring that those with higher earnings contribute proportionately more to the national exchequer.
For companies, the tax rates on rental income have been fixed at 15% for those in the ATL and a higher 30% for those not listed in the Active Taxpayers.
The FBR’s move towards a progressive tax system on rental income aligns with broader efforts to create a fairer tax regime, promoting transparency and discouraging tax evasion. By incorporating different tax rates based on income brackets, the FBR aims to strike a balance between revenue generation and incentivizing compliance.
Tax experts have welcomed the FBR’s initiative, noting that the progressive structure is a step in the right direction for fostering a tax environment that is not only revenue-driven but also considerate of varying income levels.
It is important to highlight that the FBR’s decision reflects the government’s commitment to enhancing revenue streams while ensuring that the tax burden is distributed equitably across different segments of society and business entities. This move is expected to encourage more individuals and companies to actively participate in the tax system, contributing to the overall economic development of the country.
Taxpayers are urged to familiarize themselves with the revised rates and comply with the tax regulations to avoid any penalties or legal implications. The FBR continues to emphasize the importance of tax compliance for the prosperity and sustainability of the national economy.
