FBR outlines Section 155 withholding tax rules for rental income, requiring prescribed persons to deduct tax from gross rent, including advance payments and charges for related services.

ISLAMABAD: The Federal Board of Revenue (FBR) has outlined the income tax withholding requirements applicable to rental income from immovable property in Pakistan for Tax Year 2027 under Section 155 of the Income Tax Ordinance, 2001.

The FBR issued the ordinance updated up to June 30, 2026, covering the tax year from July 1, 2026, to June 30, 2027.

Under Section 155, every prescribed person making a full or partial payment of rent, including an advance payment, must deduct tax from the gross amount of rent at the rate specified in Division V of Part III of the First Schedule.

The provision covers rent from immovable property, including payments for furniture, fixtures and services related to the property. The definition of gross rent also incorporates relevant amounts specified under Section 16 of the ordinance.

The law further clarifies that the withholding requirement applies to payments made on account of rent regardless of the head of income under which the rental income is assessed.

Section 155 identifies several categories of prescribed persons responsible for deducting tax. These include the federal, provincial and local governments; companies; non-profit organisations and charitable institutions; and diplomatic missions of foreign states.

The list also covers private educational institutions, boutiques, beauty parlours, hospitals, clinics and maternity homes.

Additionally, individuals and associations of persons paying annual gross rent of Rs1.5 million or more fall within the prescribed-person category. The FBR may also notify other persons for this purpose.

The applicable withholding rate should be checked in the First Schedule for Tax Year 2027, as the rate depends on the relevant statutory provisions.