As a salaried individual in Pakistan, it is important to understand the taxation laws and regulations governing your income. Similarly, if you own a property and earn rental income, it is crucial to be aware of the applicable tax laws. This article will provide a comprehensive guide to the taxation on salaried individuals and property income in Pakistan.
Taxation on Salaried Individuals
If an individual’s total income is comprised of more than 75% of income from salary, then they are treated as a salaried individual for tax purposes. However, if an individual has additional sources of income in addition to their salary, such as rental income or business income, then the rates of business individual tax will be applicable on such taxpayers.
It is important to note that the tax rates for salaried individuals are progressive, which means that the tax rate increases as the income level increases. The tax rate ranges from 0% to 35% for salaried individuals in Pakistan. In addition, salaried individuals are required to file their tax returns by September 30th of every year.
Taxation on Property Income
If you own a property and earn rental income, you are required to pay taxes on that income. Previously, rental income was treated as a separate block of income in the tax laws. However, that provision no longer exists, and rental income is now considered as taxable under normal business income.
The allowable deductions from property income are outlined in Section 15a of the tax laws. These deductions include:
- Repair allowance: 20% of total rent
- Any insurance paid in respect of the building during the year
- Any property tax paid during the year
- Any interest or markup paid in respect of loan taken against the building
- Legal charges paid in the year
- Any other expenses in collecting or maintaining the rent up to 4% of the total rental income
It is important to note that non-cash expenses such as depreciation cannot be deducted from the income from property.
In conclusion, understanding the taxation laws and regulations governing salaried individuals and property income in Pakistan is crucial to avoid any legal issues or penalties. As a salaried individual, it is important to file your tax returns by the deadline, and as a property owner, you must pay taxes on your rental income and comply with the allowable deductions outlined in the tax laws. By following these guidelines, you can ensure that you remain in compliance with the taxation laws in Pakistan.