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Property tax

Tax on Rental Income in Pakistan

Rent is taxed on a progressive table starting above Rs 300,000 a year. Certain tenants, called prescribed persons, must withhold from what they pay you, but since 2010 that deduction has been adjustable rather than final, so you still file and still compute your actual liability. Against that you can deduct a flat one-fifth for repairs, your provincial property tax, and profit on money borrowed to buy or build the property.

We do this for clients:Income Tax Return Filing in Pakistan

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 rent table

Division V of Part III. Rendered from the same module the rental calculator computes with, so the table and the tool cannot disagree. "Tax at the floor" is the cumulative amount owed at the bottom of the band.

Annual rentRate on the excessTax at the floor
Up to Rs 300,000Nil-
Rs 300,001 to Rs 600,0005%-
Rs 600,001 to Rs 2,000,00010%Rs 15,000
Above Rs 2,000,00025%Rs 155,000

What it comes to on your rent

Enter the annual rent to see the figure band by band, and what a tenant would withhold against it.

Rental Income Tax

Who has to withhold from your rent

Section 155(3) lists prescribed persons. Most of the list is what you would expect. One entry is not, and it catches small businesses that have never heard of the section.

  • The Federal Government, a Provincial Government, or a Local Government
  • A company
  • A non-profit organization or a charitable institution
  • A diplomatic mission of a foreign state
  • A private educational institution, a boutique, a beauty parlour, a hospital, a clinic or a maternity home
  • An individual or association of persons paying gross rent of one and a half million rupees or more in a year
  • Any other person notified by the Board

It applies whatever head your rent is taxed under

There used to be an argument that rent taxable as business income, rather than under the head Income from Property, fell outside section 155. The Finance Act 2021 added an Explanation closing it: for removal of doubt, sub-section (1) applies when a payment is made on account of rent of immovable property irrespective of head of income.

A separate Explanation, inserted in 2006, widens what the withholding is calculated on. The gross amount of rent includes amounts referred to in section 16(1) or 16(3), which is the non-adjustable deposit dealt with below. A large deposit is therefore not outside the withholding base simply because it is not called rent.

What happens when you give the deposit back

Section 16(2) handles the early refund. If you return the amount on termination of the tenancy before the ten years have expired, no portion is allocated to the year of refund or to any later year. The spreading simply stops.

Section 16(3) then handles the case that would otherwise tax the same money twice. If you let the property to a succeeding tenant and take a new non-adjustable amount from them, that succeeding amount is reduced by whatever portion of the earlier amount has already been charged to tax, and only the balance is spread. It is a sensible mechanism and it is almost never explained, which matters because a landlord who has taken deposits from two tenants in a decade is otherwise looking at an overstated figure.

What you can deduct

Section 15A, and these are more generous than most landlords realise. The repair allowance in particular is a flat proportion rather than a claim you have to evidence.

  • A repair allowance equal to one-fifth of the rent chargeable for the year, computed before any other deduction under the section. It is allowed whether or not you spent it
  • Any insurance premium paid to insure the building against damage or destruction
  • Any local rate, tax, charge or cess in respect of the property, paid to a local authority or government, other than a tax payable under the Ordinance itself
  • Ground rent
  • Profit paid on money borrowed, including by mortgage, to acquire, construct, renovate, extend or reconstruct the property
  • Administration and collection expenditure, capped at four per cent of the rent chargeable for the year
  • Legal costs of defending your title to the property or a suit connected with it
  • Irrecoverable unpaid rent, where the tenancy was bona fide and the stated conditions are met

A company letting property is on a different rate

The table above is the individual and association position. A company pays a flat rate on rent rather than the progressive bands, and the non-filer figure is double it.

The calculator on this page handles both, because the choice changes the answer substantially at the lower end: the first Rs 300,000 of rent is nil for an individual and is not for a company.

Questions

The questionspeople ask

  • How much tax do I pay on rental income in Pakistan?

    For an individual or association, on a progressive table starting above Rs 300,000 of annual rent and rising in bands. A company pays a flat rate instead. Whatever your tenant withheld is credited against that figure rather than being the end of it.

  • Is tax deducted by my tenant a final tax?

    No, and it has not been since 2010. Section 155(2), which made the deduction a final tax on income from property, was omitted by the Finance Act 2010. The deduction is adjustable, so you file, compute the tax on the rent table, and recover any excess.

  • Does my tenant have to deduct tax from my rent?

    Only if the tenant is a prescribed person under section 155(3). That includes companies, government, non-profits, and specifically a private educational institution, boutique, beauty parlour, hospital, clinic or maternity home. An individual or association only becomes one at Rs 1.5 million of gross rent a year.

  • Is a security deposit taxable in Pakistan?

    If it is not adjustable against the rent, yes. Section 16(1) treats it as rent chargeable in the year received and each of the following nine years in equal proportion. If you refund it on termination before ten years, the spreading stops for the year of refund and afterwards.

  • What expenses can a landlord deduct in Pakistan?

    Under section 15A: a flat one-fifth repair allowance, insurance premium, local rates and taxes on the property, ground rent, profit on money borrowed to acquire or build it, administration and collection costs up to four per cent of rent, legal costs defending title, and irrecoverable rent on stated conditions.

  • Can I claim the repair allowance if I did not spend it?

    Yes. Section 15A(1)(a) allows an allowance equal to one-fifth of the rent chargeable for the year, computed before any other deduction under the section. It is a proportion of rent rather than a reimbursement of expenditure.

  • Is provincial property tax deductible against rental income?

    Yes. Section 15A(1)(c) allows a deduction for 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.

  • Does section 155 apply if my rent is business income?

    Yes. An Explanation added by the Finance Act 2021 states, for removal of doubt, that the sub-section applies when a payment is made on account of rent of immovable property irrespective of head of income.

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