KARACHI: The Federal Board of Revenue (FBR) has been urged to rationalize rental income from property and individuals or Association of Persons (AOPs) should be taxes as full and final discharge of tax liability.
Karachi Tax Bar Association (KTBA) in its proposals for budget 2021/2022 said that the rental income from property, AOP or individual and company (taxable as separate block of income) should be taxed at a uniform rate of 15 percent of the gross rent as full and final discharge of tax liability.
The tax bar 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, 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 Income Tax Ordinance, 2001.
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 been gradually increased from 20 percent to 35 percent for individuals and AOPs vide the Finance Act, 2019.
Apart from that the lessor is also required to pay Sindh Sales Tax at 3 percent to SRB. It makes the total tax impact very unfair and exorbitant.
The current taxation framework makes the total tax impact on property income very unfair and exorbitant.
The KTBA further suggested that 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.
The impact of taxes (direct and indirect) on rental income will be rationalized. Investors will be encouraged to declare their genuine rental income.