Income from property: how the head works in Pakistan

Checked 19 September 2026. The legal reference is FBR’s Income Tax Ordinance consolidation amended through 30 June 2026. Rates, deductions, withholding and filing treatment must be matched to the relevant tax year and ownership facts.

Pakistan taxes income under separate heads, and each head has its own computation rules. Rent gets its own head, which sounds like a technicality until you discover that a deduction available to a business is not available to you, or that a loss you expected to offset your salary does not.

What falls under the property head

The head covers rent received or receivable from the letting of land and buildings. In practice it captures:

• Residential letting — houses, apartments, portions.
• Commercial letting — shops, offices, plazas, godowns.
• Industrial premises let to a tenant.
• Rent from land, including a let plot with no structure on it.
• Advance rent and non-refundable amounts, which are generally part of rent rather than outside it.

What it does not cover: the gain when you sell the property, which is a capital gains question with entirely different rules — see property capital gains.

Property income or business income?

This is the classification that changes the whole computation, and it turns on what you are actually supplying.

Deductions under the property head

The deductions are prescribed rather than general, which is the main practical difference from business income:

• Repairs and maintenance at the standard percentage of rent, available whether or not you spent it.
• Property tax and local rates paid.
• Insurance on the property.
• Ground rent where the land is leased.
• Interest on borrowing used to acquire, construct or improve the property, subject to conditions.
• Collection and administration costs within prescribed limits.
• Irrecoverable rent where the statutory write-off conditions are met.

Note what is absent: general overheads, and expenditure that is capital rather than revenue in nature. Substantial improvement is not an annual deduction — it generally adds to the cost of the asset and affects the eventual gain instead. The rental income guide works a full computation.

Joint and undivided ownership

Most Pakistani property is co-owned, and the tax follows beneficial ownership shares:

• Each owner declares their own share of rent and applies the computation to that share, not to the whole.
• Each owner Active Taxpayer List status drives their own withholding rate on their share.
• The shares must be documented. Splitting income across family members without an evidenced ownership basis is one of the more common enquiry triggers, because it reduces the effective rate without a supporting title position.
• Where property is inherited and undivided, sort the entitlement record before there is a transaction — inherited property.

Section 155 and the credit

Where the tenant is a prescribed person, tax is withheld on gross rent under section 155 and deposited on your behalf. Two things to manage:

1. Obtain the deduction certificate from every prescribed-person tenant, as a routine rather than in September. You cannot claim a credit you cannot evidence.
2. Check the credit appears against your registration in FBR records. A deduction certificated but never deposited against your NTN is a credit you will struggle to claim.

Where the tenant is a private individual and not a prescribed person, nothing is withheld at all. That is not relief — it means the full liability falls due through your return with nothing paid on account, so plan the cash for it.

What to keep

• Written tenancy agreements with rent, term and cost allocation stated.
• Rent credited to a bank account rather than taken in cash, matched to the agreement.
• Section 155 certificates, property tax and insurance receipts, loan interest statements.
• Evidence of vacancy periods where rent was not received.
• The acquisition file, kept with the annual rental records — it serves both this head and the eventual gain computation.
• The property in your wealth statement on a consistent basis, with funding traced — wealth statement.

Build a rent register before calculating tax

Worked example: gross rent, tax deduction and bank receipt are different figures

Assume a written agreement requires Rs 100,000 monthly rent for twelve months, so contractual annual rent is Rs 1,200,000. If the tenant deducts an illustrative Rs 120,000 and pays Rs 1,080,000 to the owner’s bank, the bank total is not automatically the gross rent. Reconcile the Rs 120,000 to the tenant’s certificate and deposited credit before claiming it. The assumed deduction is arithmetic only, not a rate quotation.

If two owners hold equal documented shares, prepare each owner’s schedule from the ownership and payment facts. Do not allocate income to a relative only because the rent was paid into their account. If a month was unpaid or the property was vacant, record the actual period and evidence rather than inserting a balancing reduction.

Deposits need their own line

A refundable security deposit and a non-adjustable amount can have different consequences. Record the agreement wording, receipt and later refund or adjustment. Section 16 of the current Ordinance consolidation provides a specific multi-year rule for non-adjustable amounts received in relation to buildings. Do not treat every amount called “security” as outside the rental computation.

Use the missing-credit guide where a tenant’s deduction is not visible, and the property-document checklist for an acquisition or sale file. A rental review should end with a gross-rent schedule, supported deductions, matched tax credits and a wealth-record check.

Sources

This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.

• FBR: Income Tax Ordinance 2001 amended through 30 June 2026
• Withholding Tax Rate Cards (FBR)
• FBR: income tax return record keeping
• FBR: completing the return and wealth reconciliation (checked 15 September 2026)

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