Rental Income Tax Pakistan applies when a person earns income by renting out land, a house, apartment, shop, office, commercial building or other immovable property.
For Tax Year 2027, rental income must be understood together with Section 15 of the Income Tax Ordinance, 2001, the normal income-tax rules applicable to the taxpayer, and Section 155, which deals with withholding tax on rent.
A common mistake is to treat the tax deducted from rent under Section 155 as the landlord’s complete or final rental income tax. These are two different concepts.
This guide explains how rental income is taxed in Pakistan, the latest Section 155 withholding rates, ATL vs Non-ATL treatment, deductions, and practical examples for 2026-27.
Table of Contents
What Is Rental Income Under Section 15?
Section 15 of the Income Tax Ordinance provides that rent received or receivable during a tax year, unless exempt under the Ordinance, is chargeable under the head “Income from Property.”
For this purpose, rent broadly means an amount received or receivable by the owner of land or a building in consideration for its use, occupation, or right to use or occupy it.
Examples can include rent received from:
- a residential house;
- apartment or flat;
- shop;
- office;
- commercial building;
- warehouse;
- land; or
- another qualifying immovable property.
Therefore, simply receiving rent from a property can create an income-tax reporting obligation even when the taxpayer’s main source of income is salary, business or another source.
Rental Income Tax Pakistan — Is There a Separate Rental Tax Rate?
For individuals, rental income is generally included in taxable income under the applicable normal income-tax regime rather than being taxed through a separate final rental-income slab.
This distinction is important.
The Section 155 rates discussed below are withholding-tax rates applied when a prescribed person makes a rental payment. They should not automatically be treated as the landlord’s final annual income-tax liability.
A landlord may therefore have:
Rental income → included in annual taxable income
and separately:
Section 155 tax → deducted at source from qualifying rent payments
The taxpayer’s final position is determined through the annual income-tax computation and return.
You can estimate general individual income tax using the TaxInfo.pk Income Tax Calculator.
Section 155 Withholding Tax on Rent
Section 155 requires a prescribed person making a payment of rent of immovable property to deduct tax from the gross amount of rent at the applicable rate.
The provision also covers advance rent payments and can include rent relating to furniture, fixtures and services connected with the property for withholding purposes.
For Tax Year 2027, FBR’s official Withholding Tax Rate Card continues to prescribe progressive Section 155 withholding rates for individuals and AOPs.
Section 155 Rent Withholding Tax Rates 2026-27 — Individual & AOP
For an individual or Association of Persons appearing on the ATL, the Tax Year 2027 rates are:
| Annual Gross Rent | Section 155 ATL Withholding Tax |
|---|---|
| Up to Rs. 300,000 | Nil |
| Above Rs. 300,000 up to Rs. 600,000 | 5% of amount exceeding Rs. 300,000 |
| Above Rs. 600,000 up to Rs. 2,000,000 | Rs. 15,000 + 10% of amount exceeding Rs. 600,000 |
| Above Rs. 2,000,000 | Rs. 155,000 + 25% of amount exceeding Rs. 2,000,000 |
These are withholding rates under Section 155, not a separate final income-tax slab for every landlord.
Section 155 Rate for a Company
Where the recipient of rent is a company, the current ATL withholding rate under Section 155 is:
15% of gross rent
For a company not appearing on the ATL, FBR’s Tax Year 2027 rate card shows:
30% of gross rent.
This again relates to withholding at the payment stage and should be distinguished from the company’s overall annual income-tax computation.
ATL vs Non-ATL Rental Withholding Tax
ATL status can have a significant effect on the amount deducted from rental payments.
Under the Tenth Schedule, where the applicable withholding rate is subject to the ATL mechanism, the rate for a person not appearing on the Active Taxpayers List is generally increased by 100% of the specified rate.
In simple words, a landlord who is not on ATL can face substantially higher tax deduction at source.
Before receiving a major rental payment, you can verify your status through our FBR ATL Status Check by CNIC guide.
For a detailed explanation of the difference, read Active Taxpayer vs Non-Active Taxpayer in Pakistan.
Example 1 — Annual Rent of Rs. 240,000
Suppose an individual landlord receives:
Monthly rent: Rs. 20,000
Annual gross rent: Rs. 240,000
Under the Section 155 ATL withholding table, gross rent not exceeding Rs. 300,000 falls in the Nil withholding bracket.
Therefore:
Section 155 withholding = Rs. 0
However, this does not by itself mean that the landlord can ignore the income.
Rental income may still need to be declared in the annual return and considered together with the taxpayer’s other income.
Example 2 — Annual Rent of Rs. 480,000
Suppose:
Monthly rent: Rs. 40,000
Annual gross rent: Rs. 480,000
The amount falls between Rs. 300,000 and Rs. 600,000.
For an ATL individual/AOP:
Tax = 5% × (Rs. 480,000 − Rs. 300,000)
Tax = 5% × Rs. 180,000
Section 155 withholding = Rs. 9,000
Again, Rs. 9,000 represents the applicable withholding calculation. It should not automatically be described as the landlord’s final annual income tax.
Example 3 — Annual Rent of Rs. 1,200,000
Suppose a property earns:
Monthly rent: Rs. 100,000
Annual gross rent: Rs. 1,200,000
The applicable ATL formula is:
Rs. 15,000 + 10% of amount exceeding Rs. 600,000
Excess:
Rs. 1,200,000 − Rs. 600,000 = Rs. 600,000
10% of Rs. 600,000 = Rs. 60,000
Add Rs. 15,000:
Section 155 withholding = Rs. 75,000
The landlord should retain evidence of the tax deducted so that the amount can be correctly reflected when preparing the annual tax return.
Example 4 — Annual Rent of Rs. 3,000,000
Suppose annual gross rent is:
Rs. 3,000,000
For an ATL individual/AOP, the applicable formula is:
Rs. 155,000 + 25% of amount exceeding Rs. 2,000,000
Excess:
Rs. 3,000,000 − Rs. 2,000,000 = Rs. 1,000,000
25% of Rs. 1,000,000 = Rs. 250,000
Total withholding:
Rs. 155,000 + Rs. 250,000
Section 155 withholding = Rs. 405,000
This example shows why ATL status and correct treatment of withholding tax become particularly important where annual rental receipts are substantial.
Who Has to Deduct Tax Under Section 155?
Section 155 does not mean that every ordinary residential tenant automatically becomes a withholding agent.
The law identifies prescribed persons who are responsible for deducting tax when making qualifying rental payments.
These include specified categories such as:
- Federal Government;
- Provincial Government;
- Local Government;
- companies;
- non-profit organizations or charitable institutions;
- diplomatic missions;
- specified private educational institutions and certain other businesses; and
- individuals or AOPs paying gross annual rent of Rs. 1.5 million or more.
The exact statutory category should be checked before assuming that a tenant is required to deduct Section 155 tax.
This is especially important for residential landlords because an ordinary individual tenant paying relatively small rent may not fall within the prescribed-person definition.
Is Section 155 Tax Final Tax?
Tax deduction under Section 155 should not simply be treated as a separate final tax on rental income.
The older provision that expressly treated Section 155 deduction as final tax was omitted from the Ordinance.
Therefore, taxpayers should distinguish between:
tax withheld from rental payments
and
final annual income-tax liability calculated through the return.
The tax deducted should be properly recorded and supported by withholding evidence when preparing the annual return.
For a broader understanding of withholding tax, see Withholding Tax in Pakistan 2026-27 – Complete Guide.
Can Expenses Be Deducted From Rental Income?
This is another area where outdated information can easily cause mistakes.
Section 15A and Companies
The current Section 15A deduction framework applies to a company deriving income chargeable under the head “Income from Property.”
The available deductions can include, subject to statutory conditions:
- repair allowance equal to one-fifth of qualifying rent;
- building insurance premium;
- qualifying local rates, taxes, charges or cess;
- ground rent;
- qualifying profit on borrowed money used to acquire, construct, renovate, extend or reconstruct the property;
- certain mortgage or capital-charge costs;
- qualifying administration and collection expenditure, subject to the statutory limit;
- certain legal expenses; and
- qualifying irrecoverable unpaid rent.
What About an Individual Landlord?
An individual should not automatically deduct the Section 15A expenses listed above merely because an older article or calculator says that all landlords receive these deductions.
The present wording of Section 15A is important because amendments changed the relevant references to a company.
For Tax Year 2027, an individual landlord should therefore calculate and report rental income according to the current provisions applicable to individuals rather than applying an outdated property-expense deduction regime.
What If Rent Is Below Fair Market Rent?
Section 15 contains an important anti-understatement rule.
Where rent received or receivable is below the fair market rent of the property, the taxpayer may be treated as having derived the fair market rent for the period during which the property was rented.
An exception applies in the circumstances specified in Section 15(5), relating to fair market rent included in the lessee’s income under the head Salary.
This means a landlord should not assume that artificially showing very low rent in an agreement will necessarily reduce taxable property income.
Rent Plus Utilities or Other Services
Another important distinction arises where a rental arrangement includes additional charges.
Under Section 15, amounts relating to amenities, utilities or other services connected with renting a building may be chargeable under the head Income from Other Sources, rather than Income from Property.
Similarly, where a building is leased together with plant and machinery, the applicable tax treatment can differ.
Landlords with mixed rental arrangements should therefore separate the nature of each receipt instead of reporting every payment under one heading without review.
How to Report Rental Income in FBR IRIS
When preparing an annual income-tax return, the taxpayer should collect the complete rental record before entering figures.
Useful records include:
- property ownership details;
- tenancy or rent agreement;
- monthly rental receipts;
- annual gross rent;
- tenant details where required;
- withholding-tax certificates or evidence;
- CPR or relevant tax-deduction records;
- details of advance rent;
- other income received in connection with the property; and
- supporting documents for any legally allowable claim.
The taxpayer should then report the rental income under the appropriate head in the return and ensure that withholding tax already deducted is correctly reflected.
For the complete filing process, see How to File Income Tax Return Online in Pakistan.
After submission, you can also use our guide to checking a filed Income Tax Return in FBR IRIS to confirm that the return was successfully filed.
Rental Income vs Property Purchase or Sale Tax
Rental income tax should not be confused with taxes arising when immovable property is purchased or sold.
These are different transactions.
Rental income: primarily involves Sections 15 and 155.
Property purchase: Section 236K may apply.
Property sale: Section 236C and other relevant tax provisions may apply.
If you are buying or selling property rather than receiving rent, use the TaxInfo.pk Property Tax Calculator Pakistan to estimate current Section 236K or 236C advance tax.
Common Rental Income Tax Mistakes
Landlords should avoid several common errors:
- failing to declare rental income;
- assuming that no Section 155 deduction means the rent is tax-free;
- treating Section 155 withholding as the final annual tax in every case;
- using old rental-income tax slabs;
- claiming Section 15A deductions meant for companies as an individual;
- ignoring fair market rent rules;
- failing to retain withholding-tax evidence;
- mixing rental income with utility or service receipts without checking their correct head of income;
- ignoring ATL status; and
- failing to reconcile rental receipts with the Wealth Statement and declared assets.
Good record keeping is particularly important because rental property itself will normally also be relevant to the taxpayer’s asset and wealth information.
Frequently Asked Questions
Is rental income taxable in Pakistan?
Yes. Rent received or receivable from qualifying land or buildings is generally chargeable under the head Income from Property under Section 15 of the Income Tax Ordinance.
What is the tax-free limit under Section 155?
For an ATL individual or AOP, the current Section 155 withholding table provides Nil withholding where annual gross rent does not exceed Rs. 300,000.
This is a withholding threshold and should not be confused with a blanket exemption from declaring rental income.
What is Section 155 in Pakistan?
Section 155 deals with deduction of tax by prescribed persons making payments on account of rent of immovable property.
Is Section 155 withholding the final rental income tax?
It should not automatically be treated as the landlord’s final annual tax liability. Rental income and tax withheld at source must be dealt with according to the taxpayer’s overall annual income-tax position.
Can an individual claim a 20% repair deduction from rental income?
The current Section 15A wording applies its property-income deduction framework to a company. Individuals should therefore not automatically apply the Section 15A repair allowance based on outdated guidance.
What happens if my tenant does not deduct tax?
First determine whether the tenant is actually a prescribed person under Section 155. Not every ordinary tenant is required to deduct withholding tax.
Does ATL status affect rent withholding tax?
Yes. Non-ATL treatment can result in a higher withholding rate under the Tenth Schedule. Checking current ATL status before a major rental payment can therefore be important.
Is rent from property in Pakistan considered Pakistan-source income?
Yes. FBR identifies rental income from the lease of immovable property in Pakistan as Pakistan-source income.
Final Words
Rental Income Tax Pakistan involves more than simply applying a percentage to monthly rent.
For Tax Year 2027, landlords should understand three separate issues:
1. Income from Property under Section 15
The rental income itself must be correctly classified and reported.
2. Withholding Tax under Section 155
A prescribed tenant or payer may have to deduct tax from gross rent according to the applicable rates and ATL status.
3. Annual Income Tax Return
The taxpayer must determine the final tax position by considering rental income together with other taxable income and applicable tax rules.
The most important practical point is not to confuse the Section 155 withholding table with a separate final rental-income tax slab.
Landlords should maintain rent agreements, payment records, withholding evidence and property information so the figures reported in the Income Tax Return and Wealth Statement remain consistent.
For the latest statutory position, refer to the FBR Income Tax Ordinance, 2001 and the FBR Tax Year 2027 Withholding Tax Rate Card.
