Owning a rented-out house, shop, or apartment in Pakistan comes with a tax obligation many landlords underestimate. Rent falls under its own head of income — "Income from Property" — and FBR expects it declared every year, whether or not your tenant already withholds tax on your behalf.
Rent Is Taxable, Even If Your Tenant Already Deducts WHT
A common misconception is that once a company tenant deducts withholding tax on the rent it pays you, your obligation ends there. It doesn't. That withholding is merely an advance payment against your final liability — you still need to report the full gross rent in your annual return and reconcile it against tax already withheld.
2026 Tax Slabs on Rental Income
- Up to Rs. 300,000/year — exempt, no tax due.
- Rs. 300,001 to Rs. 600,000 — 5% of the amount above Rs. 300,000.
- Rs. 600,001 to Rs. 2,000,000 — 10%, on a graduated basis.
- Rs. 2,000,001 to Rs. 4,000,000 — 15%.
- Above Rs. 4,000,000 — 20%, applied progressively.
These brackets apply to net rental income — after the standard repair deduction described below, not on the raw rent you receive.
What You Can Deduct Before Tax Is Calculated
- 20% flat repair allowance on gross rent, given automatically with no receipts needed.
- Local property tax paid during the year.
- Insurance premiums on the rented property.
- Ground rent or lease charges, where applicable.
- Mortgage markup, if the property was financed through a bank loan.
Section 155 Withholding When Your Tenant Is a Business
Whenever the tenant paying you rent is a registered company, firm, or AOP, the law obliges them to withhold tax before paying you, under Section 155. A filer landlord faces 15% withholding; a non-filer faces double that at 30%. On rent of Rs. 1,000,000 a year, that gap alone is Rs. 150,000 — money that stays with you simply by keeping your filer status active.
Multiple Properties Are Combined, Not Taxed Separately
If you own several rented properties, FBR doesn't tax each one on its own slab. All rental income is pooled into a single "Income from Property" total for the year, and the combined figure determines which tax bracket applies. Deductions, however, are still worked out property by property before the totals are added together. Usefully, if one property runs at a loss for the year, that loss offsets income from your other properties, since they all sit under the same head.
Quarterly Advance Tax Under Section 147
Landlords whose projected annual tax bill exceeds Rs. 1 million must also pay advance tax in four equal instalments across the year (roughly September, December, March, and June), rather than waiting to settle everything at return time. Missing these dates triggers a default surcharge calculated at KIBOR plus 3% on the unpaid amount.
Overseas Landlords Are Not Exempt
Rent from property physically located in Pakistan is taxable in Pakistan regardless of where the owner lives. Non-resident Pakistanis must still hold an active NTN and file a return declaring the rent, or risk the higher 30% non-filer withholding rate being applied by their tenant.
Reflecting Rental Property in Your Wealth Statement
Every property you own must appear in your wealth statement each year, valued at the FBR/DC rate (or actual purchase cost, if higher) rather than current market value. The income you declare and the wealth statement should line up — rent received should be traceable into your bank balance or spending. Mismatches here are one of the most common triggers for an FBR audit notice.