Karachi, June 11, 2025 – The Finance Bill 2025 has proposed a significant amendment to the Income Tax Ordinance, 2001, by introducing a minimum fair market value benchmark for rental income derived from commercial properties.
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FBR Unveils 2024 Tax Rates on Rental Income
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.
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FBR Notifies Tax Rates on Immovable Property Rental Income for 2023-24
Karachi, August 3, 2023 – The Federal Board of Revenue (FBR) has announced the tax rates on immovable property rental income for the fiscal year 2023-24.
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Non-adjustable amounts received in relation to buildings
Section 16 of Income Tax Ordinance, 2001 explains the non-adjustable amounts received in relation to buildings.
The Federal Board of Revenue (FBR) issued the updated Income Tax Ordinance, 2001 up to June 30, 2021. The Ordinance incorporated amendments brought through Finance Act, 2021.
Following is the text of Section 16 of Income Tax Ordinance, 2001:
Section 16. Non-adjustable amounts received in relation to buildings.— (1) Where the owner of a building receives from a tenant an amount which is not adjustable against the rent payable by the tenant, the amount shall be treated as rent chargeable to tax under the head “Income from Property” in the tax year in which it was received and the following nine tax years in equal proportion.
(2) Where an amount hereinafter referred to as the “earlier amount” referred to in sub-section (1) is refunded by the owner to the tenant on termination of the tenancy before the expiry of ten years, no portion of the amount shall be allocated to the tax year in which it is refunded or to any subsequent tax year except as provided for in sub-section (3).
(3) Where the circumstances specified in sub-section (2) occur and the owner lets out the building or part thereof to another person hereinafter referred to as the “succeeding tenant” and receives from the succeeding tenant any amount hereinafter referred to as the “succeeding amount” which is not adjustable against the rent payable by the succeeding tenant, the succeeding amount as reduced by such portion of the earlier amount as was charged to tax shall be treated as rent chargeable to tax under the head “Income from Property” as specified in sub-section (1).
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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Tax on income from property under updated ordinance
The rent received by a person during a tax year shall be charged under income from property. The tax on income from property shall be charged under Section 15 of Income Tax Ordinance, 2001.
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FBR updates withholding tax rates for income from property
ISLAMABAD: Federal Board of Revenue (FBR) has updated withholding tax on rental income from immovable properties for tax year 2021.
The FBR updated the withholding tax card 2020-2021 after incorporating amendments to Income Tax Ordinance, 2001 made through Finance Act, 2020.
The FBR said that every prescribed persons as per Section 155 of Income Tax Ordinance, 2001 shall collect / deduct withholding tax from recipient of rent of immovable property at the time the rent is actually paid.
Section 155: Income from Property
Any payment made on account of rent of immovable property
(A) In case of individual or AOP
1. Where the gross amount of rent does not exceed Rs, 200,000: the tax rate shall be zero
2. Where the gross amount of rent exceeds Rs, 200,000 but does not exceed Rs, 600,000: 5 percent of the gross amount exceeding Rs, 200,000
3. Where the gross amount of rent exceeds Rs, 600,000 but does not exceed Rs, 1,000,000: Rs, 20,000+10 percent of the gross amount exceeding Rs, 600,000
4. Where the gross amount of rent exceeds Rs, 1,000,000 but does not exceed Rs, 2,000,000: Rs,60,000+15 percent of the gross amount exceeding Rs, 1,000,000
5. Where the gross amount of rent exceeds Rs, 2,000,000 but does not exceed Rs. 4,000,000: Rs, 210,000+20 percent of the gross amount exceeding Rs, 2,000,000
6. Where the gross amount of rent exceeds Rs.4,000,000 but does not exceeds Rs. 6,000,000: Rs.610,000 plus 25 per cent of the gross amount exceeding Rs.4,000,000
7. Where the gross amount of rent exceeds Rs.6,000,000 but does not exceeds Rs. 8,000,000: Rs.1,110,000 plus 30 per cent of the gross amount exceeding Rs.6,000,000
8. Where the gross amount of rent exceeds Rs.8,000,000: Rs.1,710,000 plus 35 percent of the gross amount exceeding Rs.8,000,000
B) in case of company: 15 percent
The tax shall be adjustable against total tax liability.
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Uniform tax rate suggested on rental income
KARACHI: The tax rate on rental income should be made uniform for individual, Association of Persons (AOPs) and company at 15 percent.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021, recommended to bring uniformity in taxing the rental income.
The FPCCI said that at present for every person except companies the income from property is chargeable to tax at the rate specified in Division (VIA) of Part I of the First Schedule to the Ordinance, which is considered to be their final tax liability and they are not allowed any expenditure against gross rent, except option provided under sub-section (7) of section 15A of the Ordinance, in case income exceeds Rs.4 Million. Whereas, the companies are required to pay normal tax (current at 29 percent) on such income after adjustment of admissible expenditure out of gross rent.
The tax rate on rental income has now been gradually increased from 20 percent to 35 percent for individuals and AOPs though the Finance Act, 2019.
Apart from that the lessor is also required to pay Sindh Sales Tax at the rate of 3 percent to Sindh Revenue Board (SRB), which makes the total tax impact very unfair and exorbitant and lead towards un-documented business.
The present scheme of taxation on rental income resulted the rents of warehouses had increased exorbitantly and the exporters who warehoused their exportable goods are financially hurt.
Moreover, it has also distorted the income of the senior citizens, retired persons, pensioners, widows etc., whose livelihood solely depends upon rent of their property, made from their income in good old days.
The FPCCI made following proposals:
i) The rental income from property, AOP or individual and company be taxed at a uniform rate of 15% of the Gross Rent as full and final discharge of tax liability.
ii) Rental income taxable under Normal Tax Regime should be allowed to be adjusted against business loss. The restriction imposed through Finance Act, 2013 needs to be reconsidered.
Giving the rationales to the proposals, the FPCCI said:
i) The impact of taxes (direct and indirect) on rental income will be rationalized.
ii) Investors will be encouraged to declare their genuine rental income.
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Tax collection from rental income surges by 68% on better enforcement
The Regional Tax Office (RTO)-II Karachi has reported a remarkable surge in tax collection from property income during the first eight months (July-February) of the current fiscal year, marking a significant increase of 68 percent.
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Tax slabs increased for rental income from properties
KARACHI: The government has revised tax slabs for rental income from property to eight from five.
Experts at Deloitte Pakistan Chartered Accountants said that the Finance Bill 2019, proposed the increase in the number of tax slabs from five to eight.
Three new tax slabs are proposed for income exceeding Rs4,000,000 to match the maximum rate with that of the individual tax rates.
Rates of tax on income from property, based on the finance bill, shall be as follows:
S. No. Gross Amount of Rent Rate of Tax 1. Where the gross amount of rent does not exceed Rs.200,000. Nil 2. Where the gross amount of rent exceeds Rs.200,000 but does not exceed Rs. 600,000. 5 per cent of the amount exceeding Rs. 200,000. 3. Where the gross amount of rent exceeds Rs.600,000 but does not exceed Rs. 1,000,000. Rs. 20,000 plus 10 per cent of the amount exceeding Rs. 600,000. 4. Where the gross amount of rent exceeds Rs.1,000,000 but does not exceed Rs. 2,000,000. Rs. 60,000 plus 15 per cent of the amount exceeding Rs. 1,000,000. 5. Where the gross amount of rent exceeds Rs.2,000,000 but does not exceed Rs. 4,000,000. Rs. 210,000 plus 20 per cent of the amount exceeding Rs. 2,000,000. 6. Where the gross amount of rent exceeds Rs.4,000,000 but does not exceed Rs. 6,000,000. Rs. 610,000 plus 25 per cent of the amount exceeding Rs. 4,000,000. 7. Where the gross amount of rent exceeds Rs.6,000,000 but does not exceed Rs. 8,000,000. Rs. 1,110,000 plus 30 per cent of the amount exceeding Rs. 6,000,000. 8. Where the gross amount of rent exceeds Rs. 8,000,000. Rs. 1,710,000 plus 35 per cent of the amount exceeding Rs. 8,000,000.