Tax on Income from Property
Tax on Income from property or tax on rental income generated from land/ house/ flat or any immovable property [Section 15, 15A, Division VIA of Part I of the First Schedule & Division V of Part III of the First Schedule]
Tax on Income from Property: Income from property derived by an individual or an association of persons is separately taxed on the gross amount of rent at rates specified in Division VIA of Part I of the First Schedule.
Deductions in computing income under the head, “Income from property” were not allowed to individuals and associations of persons. The rate of tax on the gross amount of rent was as under:-
| Sr. # | Gross amount of rent | Rate of tax |
| 1 | Where gross rent does not exceed Rs.200,000 | NIL |
| 2 | Where the gross amount of rent exceeds Rs.200,000 but does not exceed Rs.600,000 | 5% of 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 | Rs.20,000 plus 10% of amount exceeding Rs.600,000 |
| 4 | Where the gross amount of rent exceeds Rs.1,000,000 but does not exceed Rs.2,000,000 | Rs.60,000 plus 15% of gross amount exceeding Rs.1,000,000 |
| 5 | Where the gross amount of rent exceeds Rs.2,000,000 | Rs.210,000 plus 20% of amount exceeding Rs.2,000,000 |
Through the Finance Act, 2019, bracket at serial No.5 is restricted to gross rent up to Rs.4,000,000 and beyond that, three new brackets of gross rent exceeding Rs. 4 million have been introduced with rate of tax at 25%, 30% and 35%. Now the rate of tax on the gross amount of rent would be as under:-
| S # | Gross amount of rent | Rate of tax |
| 1 | Where gross rent does not exceed Rs.200,000 | Nil |
| 2 | Where the gross amount of rent exceeds Rs.200,000 but does not exceed Rs.600,000 | 5% of 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 | Rs.20,000 plus 10% of amount exceeding Rs.600,000 |
| 4 | Where the gross amount of rent exceeds Rs.1,000,000 but does not exceed Rs.2,000,000 | Rs.60,000 plus 15% of gross amount exceeding Rs.1,000,000 |
| 5 | Where the gross amount of rent exceeds Rs.2,000,000 but does not exceed Rs.4,000,000 | Rs.210,000 plus 20% of amount exceeding Rs.2,000,000 |
| 6 | Where the gross amount of rent exceeds Rs.4,000,000 but does not exceed Rs.6,000,000. | Rs.610,000 plus 25 per cent of the gross amount exceeding Rs.4,000,000 |
| 7 | Where the gross amount of rent exceeds Rs.6,000,000 but does not exceed Rs.8,000,000 | Rs.1,110,000 plus 30 per cent of the gross amount exceeding Rs.6,000,000 |
| 8 | Where the gross amount of rent exceeds Rs.8,000,000 | Rs.1,710,000 plus 35 percent of the gross amount exceeding Rs.8,000,000 |
However, individuals and AOPs deriving gross rent exceeding Rs.4 million will have the option to pay tax at the rates provided in Division I of Part I of the First Schedule on their income from house property.
Persons availing this option can claim deductions in computing income from house property mentioned in section 15A.
The rates of deduction of tax from the gross amount of rent have also been increased similar to serial numbers 6, 7 & 8 of the table given above with three new rates at 25%, 30% and 35%.
These explanations have been issued by FBR after the Finance Act 2019 approved / passed from the parliament of Pakistan.
