Withholding tax rates on income from property for Tax Year 2019

Withholding tax rates on income from property for Tax Year 2019

The Federal Board of Revenue (FBR) has recently released the rates of withholding tax to be collected on income from property for Tax Year 2019.

The FBR has clarified the responsibilities of withholding agents and the applicable tax rates for both individuals, associations of persons (AOPs), and companies.

The withholding of tax on income from property is a crucial element in the country’s tax collection system, ensuring that the government receives its due share of revenue. These rates are outlined in Section 155 of the Income Tax Ordinance, 2001 and provide a structured framework for taxing rental income from immovable property.

For individual taxpayers and AOPs, the withholding tax rates for the tax year 2019 are as follows:

1. Where the gross amount of rent does not exceed Rs. 200,000: No withholding tax is applicable.

2. Where the gross amount of rent exceeds Rs. 200,000 but does not exceed Rs. 600,000: A 5 percent tax is levied on 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: A flat tax of Rs. 20,000 plus 10 percent of the gross amount exceeding Rs. 600,000 is applicable.

4. Where the gross amount of rent exceeds Rs. 1,000,000 but does not exceed Rs. 2,000,000: A flat tax of Rs. 60,000 plus 15 percent of the gross amount exceeding Rs. 1,000,000 is levied.

5. Where the gross amount of rent exceeds Rs. 2,000,000: A flat tax of Rs. 210,000 plus 20 percent of the gross amount exceeding Rs. 2,000,000 is collected.

For companies, the withholding tax rates are uniform and are not dependent on the amount of rent received:

• Filer companies are subject to a withholding tax rate of 15 percent.

• Non-filer companies are subject to a slightly higher withholding tax rate of 17.5 percent.

These tax rates are essential for property owners and tenants alike, as they determine the amount that must be withheld and remitted to the government by the withholding agent. Property owners and tenants should be aware of these rates to ensure compliance with the law and avoid any penalties or legal consequences.

The FBR’s move to specify these tax rates for the tax year 2019 brings much-needed clarity to the real estate sector, helping taxpayers and withholding agents understand their obligations and responsibilities. It also aids in ensuring that the tax collected from property income is appropriately distributed to the government, thereby contributing to the country’s overall revenue collection.

It is worth noting that these tax rates are subject to change in subsequent tax years, and taxpayers are encouraged to stay informed about any updates or revisions made by the FBR.

In conclusion, the FBR’s announcement of the withholding tax rates on property income for Tax Year 2019 provides a structured and clear framework for tax collection in the real estate sector. These rates are essential for individuals, AOPs, and companies involved in property transactions, and compliance with these rates is crucial to avoid legal issues. Taxpayers are advised to consult with tax professionals or the FBR’s official guidelines for the most accurate and up-to-date information on property income withholding tax rates.