If you are searching for Tax applicable on rental income from property in Pakistan, your search ends here on this post.

Amendment made in income tax law through Finance Act, 2019 results in addition of more slab rates applicable to rental income of property.

No income tax is applicable for annual rent income which is equal to or less than Rs 200,000/-

In case the tenant is withholding agent for tax purpose, he will deduct tax according to the following slab at the time of payment of rent.

Tax rates applicable on rental income (also Withholding tax rates)

SNo

Gross amount of Rent


Applicable rate (For individual & AoP)
1


Does not exceed Rs 200,000


Nil
2

Rs 200,000 to Rs 600,000


5% of the gross amount exceeding Rs 200,000
3

Rs 600,000 to Rs 1,000,000


Rs 20,000 + 10% of the gross amount exceeding Rs 600,000
4

Rs 1,000,000 to Rs 2,000,000


Rs 60,000 + 15% of the gross amount exceeding Rs 1,000,000
5

Rs 2,000,000 to Rs 4,000,000


Rs 210,000 + 20% of the gross amount exceeding Rs 2,000,000
6

Rs 4,000,000 to Rs 6,000,000


Rs 610,000 + 25% of amount exceeding Rs 4,000,000
7

Rs 6,000,000 to Rs 8,000,000


Rs 1,110,000 + 30% of amount exceeding Rs 6,000,000
8

Exceeding Rs 8,000,000


Rs 1,710,000 + 35% of amount exceeding Rs 8,000,000

(Source: Finance Act, 2019 effective from 1st July 2019 to 30 June 2020)

Illustration

Case I

In case rent of building is Rs 25,000 per month which means annual rent of Rs 300,000/- it will fall under 2nd slab and annual tax shall be Rs. 5,000 [5% of 100,000]

Case II

In case rent of building is Rs 170,000 per month which means annual rent of Rs 2,040,000/- it will fall under 5th slab and annual tax shall be Rs. 218,000 [20% of 40,000 + Rs 210,000]

Beneficial or not?

One may be curious to know whether the amendment as aforesaid and revised rates are beneficial or cruel to the taxpayers, so they would be happy to know that revised rates are carefully aligned with previous regime where income was taxed on NET basis. Average rate of tax in this regime is 3% to 11%.

You may contact us for any query or tax advice.