TL;DR: Yes, rental income is taxable in Pakistan. For Tax Year 2027, annual rent up to Rs. 300,000 is exempt for individuals; rent between Rs. 300,001 and Rs. 600,000 faces 5% withholding, and higher bands rise to Rs. 15,000 + 10% and Rs. 155,000 + 25%. Non-filers pay double. Tenants who are companies or government bodies deduct the tax at source. Rent of Rs. 50,000 per month (Rs. 600,000 a year) triggers about Rs. 15,000 a year in advance tax for a filer.
Do I have to pay tax on rental income in Pakistan?
Yes. Rental income is taxable in Pakistan under the Income Tax Ordinance, 2001 as Income from Property (Section 15). Individuals and associations of persons (AOPs) pay no tax on annual rent up to Rs. 300,000; above that, withholding tax applies on a sliding scale, and the tax is adjusted against your final liability when you file your return.
The practical tax is usually collected through Section 155 withholding: if your tenant is a company, government body, or other prescribed person, they must deduct tax from each rent payment and deposit it with FBR. The deducted amount is advance tax, credited against your final tax at year-end.
Rental income tax rates in Pakistan (Tax Year 2027, Finance Act 2026)
| Annual Gross Rent | Filer Rate | Non-Filer Rate |
|---|---|---|
| Up to Rs. 300,000 | Nil | Nil |
| Rs. 300,001 – Rs. 600,000 | 5% of rent exceeding Rs. 300,000 | 10% (doubled) |
| Rs. 600,001 – Rs. 2,000,000 | Rs. 15,000 + 10% of rent exceeding Rs. 600,000 | Doubled |
| Above Rs. 2,000,000 | Rs. 155,000 + 25% of rent exceeding Rs. 2,000,000 | Doubled |
| Companies (any amount) | 15% | 30% |
Rates per Section 155 of the Income Tax Ordinance, 2001 as updated by Finance Act 2026 (unchanged from Tax Year 2026). Non-filer rates are 100% higher than filer rates.
Worked example: tax on rent of Rs. 50,000 per month
For rent of Rs. 50,000 per month — Rs. 600,000 a year — a filer pays about Rs. 15,000 per year in advance tax (5% of the Rs. 300,000 above the Rs. 300,000 exemption), and a non-filer pays about Rs. 30,000. That is Rs. 1,250 per month for a filer.
For rent of Rs. 150,000 per month (Rs. 1,800,000 a year), a filer pays Rs. 15,000 plus 10% of Rs. 1,200,000 — about Rs. 135,000 per year in advance tax. The withheld amounts are credited when you file your income tax return, and your final liability is computed under the normal progressive rates for individuals.
What expenses can landlords deduct from rental income?
- Repair allowance: individuals and AOPs can claim a deduction for repairs (commonly 20% of rental income).
- Property taxes and local rates actually paid.
- Insurance premiums on the rented property.
- Interest on loans used to build or buy the rented property (subject to conditions).
The exact allowable deductions depend on your facts and records, so keep rent agreements, utility bills, tax receipts, and repair invoices. Claimed deductions reduce the income that the final progressive rates apply to.
Filer vs non-filer: why the difference matters
Non-filers pay roughly double the withholding on rental income. Being on the Active Taxpayers' List (ATL) cuts your rental withholding in half, and becoming a filer costs far less than the doubled rate costs in one year on a significant rental.
If you are not registered yet, follow our guide to becoming a tax filer in Pakistan.
Rental income vs capital gains on property
This article covers income from rent. If you sell the property instead, different rules apply: capital gains tax on property acquired on or after July 1, 2024 is 15% for filers regardless of holding period, and non-filers fall under the normal tax regime with a minimum 15% rate. See our capital gains tax on property sale guide and the FBR property valuations vs provincial rates guide.
How to estimate your rental income tax
Multiply monthly rent by 12, subtract the repair allowance and other deductible expenses, then apply the Section 155 table above for your advance tax, or the progressive non-salary slabs for your final liability. For planning, use the Pakistan income tax calculator with rental income entered as non-salary income.
Important disclaimer
This article is for educational planning only. It does not provide professional tax, legal, accounting, payroll, customs, or financial advice. Tax rules can change and final results may depend on your personal facts. Always verify important tax decisions with official sources or a qualified professional.