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Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Payments made to non-resident sportspersons incur a 15% tax if they are on the ATL, and a massive 30% if they are non-ATL. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • The withholding tax on banking and financial institution profits is set at 20% for those on the Active Taxpayers’ List, but jumps to 40% for those off the list. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Winning a prize bond or crossword puzzle means you lose 15% to taxes as an Active Filer, but a massive 30% if you are a Non-Filer. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • Commercial importers of Part-II goods face a 3.5% withholding tax if they are Filers, but the rate doubles to 7% for Non-Filers. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Commercial importers bringing in Part-III items are hit with a 12% tax rate if they are Non-Filers, compared to only 6% for Active Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Buying a high-end 2501cc to 3000cc vehicle leaves Filers with a 9% tax bill, but absolutely punishes Non-Filers with a massive 27% tax rate. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% tax for Non-Filers. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Profits on debt from mutual funds deriving 50% or more income from debt carry a huge 50% tax for Non-Filers, compared to 25% for Filers. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Payments made to non-resident sportspersons incur a 15% tax if they are on the ATL, and a massive 30% if they are non-ATL. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • The withholding tax on banking and financial institution profits is set at 20% for those on the Active Taxpayers’ List, but jumps to 40% for those off the list. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Winning a prize bond or crossword puzzle means you lose 15% to taxes as an Active Filer, but a massive 30% if you are a Non-Filer. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • Commercial importers of Part-II goods face a 3.5% withholding tax if they are Filers, but the rate doubles to 7% for Non-Filers. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Commercial importers bringing in Part-III items are hit with a 12% tax rate if they are Non-Filers, compared to only 6% for Active Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Buying a high-end 2501cc to 3000cc vehicle leaves Filers with a 9% tax bill, but absolutely punishes Non-Filers with a massive 27% tax rate. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% tax for Non-Filers. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Profits on debt from mutual funds deriving 50% or more income from debt carry a huge 50% tax for Non-Filers, compared to 25% for Filers. •

Renting out property in Pakistan has become a popular source of steady income for individuals and businesses. However, with rental income comes the responsibility of complying with tax laws under the Income Tax Ordinance, 2001. Understanding how rental income is taxed, the applicable rates, and the deductions you can claim is essential to avoid penalties and maximize your earnings.

This article provides a comprehensive breakdown of rental income taxation in Pakistan for the tax years 2024–25, 2025–26 and 2026-27, effective from July 1, 2024, to June 30, 2027.

What is Rental Income?

Under Section 15 of the Income Tax Ordinance 2001, rental income across Pakistan is taxed as “Income from Property.” Which refers to the earnings generated from leasing immovable properties, such as houses, apartments, or commercial spaces. Sources of rental income include:

Monthly Rent: Regular payments made by tenants.
Security Deposits: Refundable amounts held as collateral against damages or unpaid rent.
Key Money: One-time upfront payments (legality varies).
Premiums: Advance amounts exceeding regular rent payments.

Explanation: If a building is leased along with plant and machinery, the rental income is not considered “Income from Property.” Instead, it is classified under “Income from Other Sources,” which is subject to different tax rules. The tax authorities may apply fair market rent instead of the actual rent received if they suspect an undervaluation in the rental agreement.

Exemption: Certain types of property income are exempt from taxation under this section:

Government-Owned Properties: Rental income from properties owned by the government.
Charitable Buildings: Income generated from properties used exclusively for charitable purposes.

Security Deposits vs. Regular Rent

Monthly rental income is fully taxable in the year it is received. However, security deposits and token money (refundable upfront payments) are taxed differently. Instead of being taxed immediately, these amounts are spread over 10 years, reducing the immediate tax liability and ensuring a manageable tax impact.

If a tenant vacates the property before completing the rental period and receives a full refund of the security deposit, tax reporting must be adjusted accordingly. Any portion of the deposit that was reported as taxable income for future years is no longer subject to taxation.
If a new tenant moves in and provides another security deposit, only the portion of the deposit that was not previously taxed will be subject to taxation. The already-taxed portion from the prior deposit is excluded.

Understanding Rental Income Tax in Pakistan

Rental income in Pakistan is subject to a dual tax system:

1. Withholding Tax (WHT) on Rent

Withholding Tax is deducted at the source by tenants and deposited with the Federal Board of Revenue (FBR) before 15th of next month. Companies are liable to deduct WHT on rent regardless of total rent. However, individuals/AOPs will deduct tax on rent if paying more than 1.5 million rupees annually. The applicable rates for individuals in the tax year 2026-27 are:

Annual Rent (PKR)	Filer’s Tax Rate	Non-Filer’s Tax Rate
Up to 300,000	Exempt	Exempt
300,001 – 600,000	5% on above 300,000	10% on above 300,000
600,001 – 2,000,000	15,000 + 10%	30,000 + 20%
Above 2,000,000	155,000 + 25%	310,000 + 50%

Companies WHT rates on rental income are 15% for active and 30% for in-active.

Deductions, as listed below, are not allowed while calculating withholding taxes on rent. For real time and accuarte withholding tax calculations you can use our Rental Income (Withholding) Tax Calculator.

2. Final Tax on Income from Rent

Final Tax is calculated on net rental income after allowable deductions. Property owners are required to pay this tax when filing their annual returns. Tax slabs on rental income in Pakistan for 2026-27 are as follows:

Annual Rental Income (PKR)	Tax Payable
Up to 600,000	Exempt
600,001 – 1,200,000	15%
1,200,001 – 1,600,000	90,000 + 20%
1,600,001 – 3,200,000	170,000 + 30%
3,200,001 – 5,600,000	650,000 + 40%
Above 5,600,000	1,610,000 + 45%

Companies rental income tax rates are 29% with 250 million plus annual turn-over, while 20% for below 250 million annual turn-over.

Explanation: Final taxes on rental income are taxed at the individual tax rates as specified in Income Tax Ordinance. You can calculate your annual tax in real time using our Rent Tax Calculator.

Maximizing Tax Savings on Rental Income

To minimize your tax liability, you can claim the following deductions:

Building Repairs and Maintenance: A standard deduction of 20% of the rental income is allowed for repairs and maintenance. This includes plumbing, electrical repairs, painting, and other routine upkeep expenses.
Insurance Premiums: Paid to insure the rental property against risks such as fire, natural disasters, and damages are deductible.
Local Taxes and Charges: Any local government taxes levied on the rental property are deductible.
Ground Rent (Leasehold Properties): Annual ground rent paid to the landowner
Loan Interest: Interest paid on loans taken for purchasing, constructing, or renovating a rental property is a deductible expense.
Management and Collection Expenses: Advertising costs for listing rental property. Property management fees paid to third-party firms. Commissions paid to real estate agents for securing tenants. Up to 4% of annual rent.
Legal Expenses: These include stamp duties, court fees, and legal costs for lease agreements or tenant dispute resolutions.
Irrecoverable Rent (Under Specific Conditions): Unpaid rent under certain circumstances

Need an NTN for your work or banking? Our fast-track service for NTN registration helps you apply for your FBR NTN online effortlessly.

Deductions Not Allowed on Rental Income

Certain expenses cannot be deducted from rental income, as outlined by the Income Tax Ordinance, 2001:

Capital Expenditures: Expenses related to acquiring or significantly improving the property are not deductible. This includes the initial purchase price and major renovations that enhance property value.
Personal Expenditures: Any costs incurred for personal use of the property are not deductible. Utility bills for self-occupied portions of the rental property cannot be claimed.
Salaries and Wages (in Specific Cases): Salaries of individuals managing the property are deductible, but general salaries unrelated to rental operations are not.
Withdrawals from Provisions: Amounts withdrawn from provisions for liabilities (e.g., doubtful debts) are not deductible unless they represent actual expenses incurred.
Taxes, Duties, and Levies Already Claimed as Refunds: Any tax amounts claimed as a refund or credit cannot be deducted again.
Payments Prohibited Under the Law: Any expenses explicitly prohibited by Pakistani law are not deductible.
Fines and Penalties: Fines and penalties incurred for violations (e.g., late property tax payments, building code infractions) are not tax-deductible.

How to Calculate Rental Income Tax?

Follow these steps to determine your rental income tax liability:

Calculate Gross Rental Income: Include monthly rent, security deposits, and other payments.
Compute Withholding Tax: Apply the WHT rate based on your filer status.
Deduct Allowable Expenses: Subtract eligible deductions to arrive at net rental income.
Calculate Final Tax: Use the net rental income and applicable tax slabs.
Adjust for WHT: Subtract withholding tax paid from the final tax liability to find your net payable tax.

Example Calculation of Rental Income Tax

Suppose you earned PKR 1,500,000 in annual rental income as an active filer and your status is individual. While you’re claiming PKR 200,000 in deductions. Your rental tax liablities in Pakistan will be:

Withholding Tax: PKR 105,000 (based on WHT slab)
Net Rental Income: PKR 1,300,000
Final Tax: PKR 110,000 (from tax slabs)
Net Payable Tax: PKR 5,000 (110,000 – 105,000)

To calculate tax on rent, withholding tax for rental property and rental income deductions you can use our real time and accurate rental tax calculators.

Filing Rental Income Tax Returns

To benefit from tax deductions, rental income must be declared in the annual tax return. The following steps should be taken:

Report total rental income.
Deduct allowable expenses.
Compute net taxable rental income.
Apply relevant tax slab rates to determine tax payable.
Submit the tax return before the deadline to avoid penalties.

Reporting rental income tax in Pakistan is mandatory for landlords — let our experts handle your FBR rental tax return accurately and on time.

Key Takeaways:

Two-Tier Tax System: Rental income is subject to both withholding tax and final tax. Withholding tax is deducted by the tenant and remitted to the government.
Strategic Deductions: Various deductions are allowed under Section 15A of the Income Tax Ordinance. Utilize allowable deductions to minimize your tax liability. Local taxes (if cliamed), Fines, penalties, and capital expenditures are not deductible.
Filer Status: Filer status can significantly impact your tax rates. Withholding tax is adjustable against the final tax liability. Filers enjoy lower tax rates compared to non-filers.

Professional Advice: Strategic use of deductions can minimize tax liability and maximize rental income. Consult a tax professional for personalized advice and accurate tax calculations.

Frequently Asked Questions (FAQs) on Rental Income Tax in Pakistan

Do I have to declare rental income in my tax return?
Yes. All rental income must be declared in your annual tax return, even if withholding tax has already been deducted by the tenant. Only then can you adjust WHT against your final liability.

What is the difference between withholding tax and final tax on rental income?
Withholding Tax (WHT) is deducted by the tenant at source and deposited with FBR. Final Tax is calculated by the property owner at year-end after allowable deductions. WHT is adjustable against your final tax liability.

What deductions can I claim against rental income?
You can claim deductions such as building repair allowance (20% of rent), insurance premiums, loan interest, management expenses (up to 4%), legal expenses, and irrecoverable rent (under conditions).

Which expenses are not deductible from rental income?
Capital expenditures (like property purchase/major renovation), personal expenses, fines/penalties, and prohibited payments under law are not deductible.

Is rental income from government or charitable properties taxable?
No. Rental income from government-owned or charitable-use properties is exempt under Section 15 of the Income Tax Ordinance, 2001.

How are security deposits taxed?
Refundable security deposits are not taxed immediately. They are spread over 10 years for tax purposes. If refunded early, tax reporting must be adjusted.

How does filer status affect rental income tax?
Filers pay lower withholding tax and can adjust WHT against final liability. Non-filers face significantly higher rates.

How do companies get taxed on rental income?
Companies are subject to 15% WHT (if active) and 30% (if inactive). Their final tax rate is 29% (if turnover > PKR 250M) or 20% (if turnover < PKR 250M).

How can I calculate rental income tax easily?
You can use our Rental Income Tax Calculator for real-time, accurate calculations of withholding and final taxes, including deductions.

In conclusion, rental income in Pakistan is subject to a two-tier tax system involving both withholding tax and final tax, with rates varying depending on filer status and income levels. By keeping accurate records, utilizing allowable deductions, and filing returns on time, property owners can reduce their tax burden and ensure compliance with FBR requirements. To simplify the process, you can use our Rental Income Tax Calculator for real-time calculations, or consult a tax professional for personalized advice tailored to your specific situation.

Hayat Akbar

Articles: 6

43 Comments

Rasheed

June 6, 2026 / 4:07 pm Reply

Assalam o Alaikum,
I have 39,60,000 taxable income from salary. Tax deducted at source is 5,62,070. I have rental income 13,56,700, withholding tax deducted on rental income is 92,992. I want to know should I need to pay any additional taxes.
- Binte Zafar
  
  June 6, 2026 / 5:14 pm Reply
  
  Final tax payments depends on other financial history as well. Rental income has its own deductable allowances listed above. you can use our tax caclulators to find your tax liablitiy and/or reach our helpline to get exact value of the final taxes after having a look onto your detailed financial history.
Zareen Jamshed

October 1, 2025 / 4:35 pm Reply

If tax on rental income from shops is deducted monthly by the agent company,then why are all rents clubbed together and then tax is recalculated
- Binte Zafar
  
  October 2, 2025 / 4:43 pm Reply
  
  Cause tax is calculated on total income.
Muhammad Iftikhar

September 9, 2025 / 10:40 pm Reply

I am a retired pensioner from Air Force and possess a house which is rented out. No other source of income except pension and the rent. Why received notices of S 147 in the iris. Should I disregard as I have no business or how to respond.
- Binte Zafar
  
  September 10, 2025 / 9:57 am Reply
  
  If you have no tax payable respond with same answer. It is advisable to reply with proper calculations rather ignoring.
Iftekhar

August 18, 2025 / 7:51 pm Reply

Is my rental income clubbed with my office salary when it comes to calcucation of total tax.

OR Rental income will be considered separate and taxation will only be based on rental slabs?
- Hayat Akbar
  
  August 18, 2025 / 11:01 pm Reply
  
  If your salary income is less than 75% of your total income, then your income (including salary) is taxed at individual tax rates.
Ehsan Muhammad

July 21, 2025 / 4:30 pm Reply

I wish to know the FBR has mentioned in the valuation of properties, off road and on road, how can i understand the location of which property is off road and which is on road?
- Hayat Akbar
  
  July 22, 2025 / 2:32 am Reply
  
  If property is located along-side the main Road it is on-road and if it not attached to main road that will be off-road. Mostly commercial properties falls under on-road.
  - Raja Shakil
    
    July 27, 2025 / 9:59 am Reply
    
    siddiq here salam who pays rental income tax tenant or owner
Asmar

July 7, 2025 / 11:46 pm Reply

We as a company paid Rs. 600,000 annual rent to our landlord. How much WHT we need to deduct at the end of the fiscal year to be submitted as withholding agent.
- Hayat Akbar
  
  July 7, 2025 / 11:53 pm Reply
  
  WHT is deducted based on the status of the owner not tenant. You can easily calculate WHT on rental income by using our Rental WHT Calculator, simply enter details of the owner and rent. However, it should be noted that WHT is deducted as soon as rent is paid (mostly monthly) and deposited with FBR before 15th of the following month. Quarterly WHT Statement should be filed for after every three months.
Muhammad Asif

June 14, 2025 / 10:12 pm Reply

What is the reason/ difference of tax rate at para 1 is rate for individual and at para 2 for property’s owner as both are rental income.
- Hayat Akbar
  
  June 17, 2025 / 12:45 am Reply
  
  Para 2 (Final Tax) is the actual taxes on income from rent at the end of the year. A portion of this is collected by FBR in advance every month or at the time rent/advances are received, these rates are mentioned in Para 2.
Usman Ahmad Butt

April 25, 2025 / 9:39 am Reply

If WHT is paid by tenant than why that WHT minimize income tax of landlord?
- Binte Zafar
  
  April 25, 2025 / 3:26 pm Reply
  
  tenent withholds a part of tax of owner and pay to govt on his behalf.
Muhammad KHAN

March 30, 2025 / 9:19 am Reply

My gross annual Rent is Rs. 420000, am a filer. How much will be the final tax where WHT at source is Rs. 705000.
- Binte Zafar
  
  March 30, 2025 / 12:19 pm Reply
  
  You can use our calculators to calculate tax payable.
  https://calculators.taxationpk.com/rental-tax-final/
Haisal Hameed

March 20, 2025 / 4:38 pm Reply

What will be income tax on monthly rent Rs 120000 if i am an active filer. Do i have to pay the tax on a monthly basis or annual basis. What would be the procedure to pay tax in Karachi.
- Binte Zafar
  
  March 20, 2025 / 5:52 pm Reply
  
  Tax on rental income is paid annually at time of filing of tax returns.
  Unless the property is rented to a company in that case they will deduct tax at time of paying the rent.
  - Javed Akhtar
    
    March 23, 2025 / 6:51 pm Reply
    
    Aoa
    I want to know that I rented my factory land on rent they give us full year rent which is 1800000 and some amount I use for renovation now tax department is asking for tax before one year end so can I get instalment on it bcz I use for repair.plz let me know
    - Binte Zafar
      
      March 23, 2025 / 6:57 pm Reply
      
      Advance tax is paid on quarterly basis, in 4 equal installments during the year.
      
      You can reach at our WhatsApp number for specific guidence.
Inzimam Ul Haq

March 4, 2025 / 3:00 am Reply

What are the tax rates of company?
- Hayat Akbar
  
  March 4, 2025 / 3:03 am Reply
  
  Companies pays flat 15/30 percent WHT while 29/20 percent final.
Mahmood ul Hassan Khan

November 4, 2024 / 2:05 pm Reply

any notification for 20 % exemption on repair & maintenance for house rent, please
- Binte Zafar
  
  November 4, 2024 / 5:58 pm Reply
  
  Section Reference from Income Tax Ordinance mentioned in the article
Bilal

August 5, 2024 / 7:15 pm Reply

if i am a withholding agent and I have to deduct tax should i deduct 1/5 charges of repair to calculate tax amount
- Hayat Akbar
  
  August 5, 2024 / 9:12 pm Reply
  
  No, you have to deduct WHT at Gross, Deductions are allowed to the owner in Final taxes at the end of the year while filing tax-returns.
Akbar Bukhari

July 21, 2024 / 12:14 pm Reply

Is there any change for WHT for year 24/25?
- Hayat Akbar
  
  July 21, 2024 / 11:55 pm Reply
  
  No, they’re same for this year as well.
M.A.Awan

July 20, 2024 / 10:18 am Reply

Excellant informations for rental income slabs
- Hayat Akbar
  
  July 20, 2024 / 4:34 pm Reply
  
  Thank you for the feedback. Keep visiting.
Hussain Shah

July 8, 2024 / 9:13 pm Reply

My gross rental income for year 2023/2024 is Rs 8500000, how much tax do I have to pay? I am a tax filer.
- Binte Zafar
  
  July 8, 2024 / 11:14 pm Reply
  
  Approx 1.2m.
- Hasnain
  
  July 28, 2024 / 1:06 pm Reply
  
  15000+ 10% of 250000 that is 25000 so in total 40000
  - Hayat Akbar
    
    July 28, 2024 / 2:19 pm Reply
    
    It seems that you have mis-calculated the final taxes. Your calculation are for 850k withholding only. While he is asking for 8500k final taxes.
Amir

July 1, 2024 / 2:10 am Reply

I am getting $3300 tax per
Month , how much tax do I have to pay on it
- Binte Zafar
  
  July 1, 2024 / 8:01 am Reply
  
  Need more info on that , nature of services provided, residential status, local or foreign income?
  For free tax consultation drop message on WhatsApp No. 03 178 111 178.
Abid Rasool

June 1, 2024 / 2:03 pm Reply

Hello
Good Afternoon!
Its Abid here, want to know about tax on rental equipment e.g. Camera for film industries and accessories.
- Binte Zafar
  
  June 4, 2024 / 11:12 am Reply
  
  Reach our WhatsApp number for specific query and free consultation.
  - A. Shakoor
    
    July 27, 2024 / 7:21 pm Reply
    
    Kindly let me your WhatsApp number. I need some guide for filling of income tax return. Regards
    A. Shakoor
    - Hayat Akbar
      
      July 27, 2024 / 7:22 pm Reply
      
      Its mentioned on the website, 03 178 111 178