ISLAMABAD: Finance Bill, 2020 has proposed many changes to taxation of property income for tax year 2021.
According to commentary of PWC A. F. Ferguson Chartered Accountants, prior to amendments made through Finance Act, 2019, rental income of non-corporate persons was taxed on a presumptive basis not allowing any deductions and allowances.
The Finance Act, 2019 introduced an option for non-corporate persons deriving rental income exceeding Rs 4 million for taxation on net income basis at the applicable rate.
The ceiling of Rs. 4 million for entitling this regime is now proposed to be done away.
As a result, all non-corporate persons with rental income can now opt to be taxed at par with corporate persons.
In case rental income is computed on net income basis, certain specific deductions are allowed, such as repair allowance, financial charges, insurance premium, local taxes, etc.
In addition to these specific deductions, all other expenditure wholly and exclusive incurred for the purpose of rental income including administration and collection chares, etc. is allowed subject to a threshold of 6 percent of gross rentals.
The threshold of 6 percent is now proposed to be reduced to 2 percent.