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Property tax

What a Landlord Can Deduct in Pakistan

Section 15A allows a landlord to deduct a flat one-fifth of rent for repairs whether or not it was spent, insurance, local rates and taxes including provincial property tax, ground rent, profit on money borrowed to acquire or build the property, collection costs up to four per cent, legal costs of defending title, and irrecoverable rent. These are available to an individual, not only to a company.

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Where these figures come from

Statutory basis
Income Tax Ordinance, 2001, as amended by the Finance Act 2026, for tax year 2027 (1 July 2026 to 30 June 2027).
Last checked against the statute
by BarrioVibe, which files income tax returns through FBR IRIS.

These figures are an estimate computed from the rates above, not tax advice for your situation. Your return depends on facts a form cannot see, so treat the number as a starting point and speak to us before you file on it.

The deductions, and what each is limited by

Section 15A(1). Two are capped as a proportion of rent, and the rest are actual amounts.

DeductionLimit
RepairsOne-fifth of rent chargeable, computed before other deductions
Insurance premium against damage or destructionActual
Local rate, tax, charge or cess on the propertyActual, excluding tax under the Ordinance
Ground rentActual
Profit on money borrowed to acquire, construct, renovate, extend or reconstructActual
Administration and collection chargesFour per cent of rent chargeable
Legal costs defending title or a suit connected with the propertyActual
Irrecoverable unpaid rentThe unpaid rent, on stated conditions

The collection charge was cut, and the older figure still circulates

Clause (h) allows expenditure paid wholly and exclusively for the purpose of deriving rent, including administration and collection charges, capped as a proportion of rent chargeable for the year.

The cap was six per cent and the Finance Act 2020 substituted four. Pages quoting six per cent are six years out of date, which is a small error in itself but a useful signal about the rest of the page it appears on.

Interest on the loan that bought the property

Clause (e) allows profit paid or payable on any money borrowed, including by way of mortgage, to acquire, construct, renovate, extend or reconstruct the property. Clause (g) covers profit or interest where the property is subject to a mortgage or other capital charge.

Note what the borrowing has to be for. It is the acquisition or improvement of the property producing the rent, not borrowing secured on it for another purpose. A loan taken against a rental property to fund a different business is not within the clause on its face.

What the rent is taxed at once deductions come off

The deductions above reduce the figure the rent table is applied to. Enter the rent to see the bands, then work from the net figure rather than the gross.

Rental Income Tax

What is not deductible

Anything already claimed elsewhere, and the income tax itself. The carve-out in clause (c) is explicit on the second point.

The repair allowance also settles a question people ask in the other direction: because it is a fixed fifth rather than actual expenditure, there is no separate claim for the repairs themselves on top of it. The fifth is the repair deduction, whatever the invoices say.

Questions

The questionspeople ask

  • Can I claim a repair allowance if I did not repair anything?

    Yes. Section 15A(1)(a) gives an allowance equal to one-fifth of the rent chargeable for the year, computed before other deductions. It is a proportion of rent rather than a reimbursement of expenditure, so it is allowed whether or not you spent it.

  • Can an individual landlord claim section 15A deductions, or only a company?

    An individual can. The footnotes make it look company-only, but the convention is that a footnote names the word REPLACED, so "company" was replaced by "person" in 2021. The operative text reads "person", consistent with section 15(1).

  • Is provincial property tax deductible against rental income?

    Yes. Section 15A(1)(c) allows any local rate, tax, charge or cess in respect of the property paid to a local authority or government, excluding only tax payable under the Income Tax Ordinance. Provincial Urban Immovable Property Tax qualifies.

  • Can I deduct my home loan interest against rent?

    Profit on money borrowed to acquire, construct, renovate, extend or reconstruct the property is deductible under section 15A(1)(e). The borrowing must be for the property producing the rent, not merely secured against it for another purpose.

  • How much can I claim for collecting the rent?

    Up to four per cent of the rent chargeable for the year, for expenditure wholly and exclusively incurred in deriving the rent including administration and collection charges. The cap was six per cent until the Finance Act 2020 reduced it.

  • Can I write off rent a tenant never paid?

    Only on the conditions in clause (j). The tenancy must have been bona fide, the tenant must have vacated or steps taken to compel them, they must not occupy another property of yours, and you must have taken reasonable steps to sue or have grounds to believe proceedings would be pointless.

  • Can I claim actual repair costs on top of the one-fifth allowance?

    No. The one-fifth is the repair deduction. Because it is a fixed proportion rather than actual expenditure, there is no separate claim for the invoices on top of it.

  • Is my income tax deductible against rental income?

    No. Clause (c) allows local rates and taxes on the property but expressly excludes any tax payable under the Income Tax Ordinance itself.

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We file returns through IRIS every day. If the answer above raises a question about your own case, that is the conversation to have before the deadline rather than after it.

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