Is Rental Income Taxable in Pakistan?

Yes. Under the Income Tax Ordinance 2001, rental income from property is a separate head of income called "Income from Property." Whether you rent a house, apartment, shop, office, or warehouse, you must declare the income and pay tax accordingly.

Many property owners assume that because their tenant deducts tax at source (WHT), they don't need to file a return. This is incorrect — the WHT deducted by tenants is an advance tax, and you must still file your annual FBR return declaring gross rent received.

Rental Income Tax Rates Pakistan 2026

Annual Rental IncomeTax RateTax Amount
Up to Rs. 3,00,000NilRs. 0
Rs. 3,00,001 — Rs. 6,00,0005%Up to Rs. 15,000
Rs. 6,00,001 — Rs. 20,00,00010%Up to Rs. 1,40,000
Rs. 20,00,001 — Rs. 40,00,00015%Up to Rs. 3,00,000
Above Rs. 40,00,00020%Progressive

Note: These rates apply on net rental income after allowing the standard 20% deduction for repairs. Actual rates may vary; always confirm with a tax consultant for your specific situation.

Allowed Deductions from Rental Income

FBR allows the following deductions before calculating your taxable rental income:

  • 20% Standard Deduction: A flat 20% of gross rent is deducted automatically for repairs and maintenance — no receipts required
  • Property Tax: Any local government property tax paid during the year is deductible
  • Insurance Premium: Insurance paid on the rented property is deductible
  • Ground Rent: Any ground rent or lease payments made are deductible
  • Markup/Interest: If the property was purchased with a mortgage loan, markup paid can be deducted

Section 155 — Withholding Tax on Rent

If your tenant is a company, firm, or AOP (Association of Persons), they are legally required to deduct withholding tax on rent under Section 155 of the Income Tax Ordinance. Current rates:

Tenant TypeWHT Rate (Filer)WHT Rate (Non-Filer)
Company or AOP as tenant15%30%
Individual tenantNo WHT obligation—

Being a tax filer cuts your WHT rate on rent in half — from 30% to 15%. On Rs. 10 lakh annual rent, that's Rs. 1.5 lakh saved every year just by filing your return.

How to Declare Rental Income in FBR Return

  • Login to FBR IRIS portal (iris.fbr.gov.pk)
  • Open your Income Tax Return for the relevant tax year
  • Go to "Income from Property" section
  • Enter gross rent received from each property
  • System automatically calculates the 20% deduction
  • Enter property tax paid and any mortgage markup
  • Enter WHT already deducted by tenants (as advance tax)
  • Calculate net tax payable after adjusting advance tax

Frequently Asked Questions

What is the tax rate on rental income in Pakistan 2026?
Rental income up to Rs. 3,00,000 is exempt. Above that, rates range from 5% to 20% on net income (after 20% standard deduction). The maximum rate of 20% applies on annual net rental income above Rs. 40 lakh.
Can I deduct expenses from my rental income for tax purposes?
Yes. FBR allows a standard 20% deduction from gross rent for repairs and maintenance without requiring receipts. You can also deduct property taxes, insurance, and mortgage markup paid.
My tenant deducts tax on rent — do I still need to file a return?
Yes. The withholding tax deducted by your tenant is an advance tax. You must still declare gross rent in your annual FBR return. The WHT paid is then credited against your total tax liability.
Is rental income from a shop taxed differently than a house?
No — the same tax rates apply to rental income from residential and commercial properties alike under "Income from Property." The rates depend on total annual rental income, not the type of property.

Rental Income? We'll Handle Your FBR Return

Property owners across Pakistan trust Kamboh Associates for accurate rental income tax filing and maximum legal deductions.