How Rental Income Tax Works in Pakistan — Section 15 (2025–26)
Rent from property is taxed as income from property under Section 15 of the Income Tax Ordinance, 2001. You aren't taxed on gross rent — first you subtract the allowable deductions under Section 15A to reach your net rental income, and that net figure is taxed at the applicable income tax slab rates. For individuals and AOPs, rental income is added to total income and taxed at the normal slab rates (the separate property-income rate table was abolished in 2019).
Allowable Deductions (Section 15A)
The largest deduction is the repair allowance — up to 20% (one-fifth) of the rent chargeable to tax, which is allowed automatically without receipts. You may also deduct: property tax / local rate, building insurance premium, interest on a loan taken to buy or construct the property, ground rent, rent-collection and administration charges (capped), and irrecoverable (unpaid) rent. These reduce the taxable base, so net rental income is lower than gross rent.
Worked Example
Suppose your annual gross rent is Rs. 1,200,000. Deduct the 20% repair allowance (Rs. 240,000) → net rental income of Rs. 960,000. If rent is your main income, the non-salaried slabs apply: 15% of (960,000 − 600,000) = Rs. 54,000 for the year. Other deductions (insurance, loan interest) would reduce this further. The calculator applies your exact figures.
Frequently Asked Questions
Does the tenant deduct tax on my rent?
Yes — if the tenant is a "prescribed person" (a company, government body, or registered firm), they deduct advance tax under Section 155 and deposit it by the 15th of the following month. No tax is withheld if your annual rent is Rs. 300,000 or less. This withheld tax is adjustable against your final liability.
Is any rental income tax-free?
The first Rs. 600,000 of your total taxable income is taxed at 0%. Separately, the tenant withholds no tax under Section 155 if annual rent is Rs. 300,000 or less.
Are companies taxed the same way?
No. Companies pay tax on rental income at flat corporate rates, not the individual slabs shown here.