If you have given any property on rent then withholding Tax is applicable on that immovable property as per Federal Board of Revenue (FBR).
Details about tax on rental income are prescribed in Section 155 of Income Tax Ordinance, 2001. It defines the amount on which tax is exempted and then further divides property income in different slabs where tax rates increases with rental income.
The tax rates for different rental income for individual or Association of Person (AOP) are as follow:
- No tax if the gross amount of rent is Rs. 200,000 or below
- 5% tax if the gross rent income is up to 600,000. Tax will be applicable on the rental income above 200,000
- Tax of Rs. 20,000+10% if the rent is greater than 600,000 but does not exceed Rs, 1,000,000
- Tax of Rs. 60,000+15% if the rent is greater than 1,000,000 but doesn’t exceed Rs. 2,000,000
- Tax of Rs. 210,000+20% if the rent exceeds Rs. 2,000,000
To understand this taxation policy consider a property which generates an income of Rs. 800,000. On such property a fixed tax of Rs. 20,000 will be applied because the income is greater than Rs. 600,000. Then a 10% tax is further charged on Rs. 200,000 (Rs. 800,000 –Rs. 600,000) which is Rs. 20,000
So the Total tax on the rental income of Rs. 800,000 will be Rs. 40,000. This includes fix tax of Rs. 20,000 and another 20,000 as 10% of Rs. 200,000.
If the rental income is generated by a company then the tax will be 15% for filers and 17.5% for non-filers.
So before renting a property make sure you know the details of the tax on that rental income.