Property tax rates in Pakistan

Introduction

As property rental is becoming a popular source of income, it’s important to know the tax implications of earning from this source. The excise and taxation rates for rental income from the immovable property during 2022-2023 have been announced by the government. In this article, we’ll discuss the tax rates for rental income, the calculation of tax, and the tax-filing process.

Property tax rates in Pakistan for Rental Income

The property tax rates  in Pakistan for rental income from immovable property during 2022-2023 have been set according to the income slabs as follows:

• Income up to Rs. 1,200,000: 0%
• Income from Rs. 1,200,001 to Rs. 2,400,000: 5%
• Income from Rs. 2,400,001 to Rs. 4,800,000: 10%
• Income from Rs. 4,800,001 to Rs. 7,200,000: 15%
• Income from Rs. 7,200,001 to Rs. 10,000,000: 20%
• Income above Rs. 10,000,000: 25%

It’s important to note that the above tax rates are only applicable to rental income from immovable property. Rental income from the movable property is taxed differently.

Calculation of Property Tax/excise and taxation Rates In Pakistan

To calculate the tax on rental income, you need to follow these steps:

1. Calculate the total rental income you received during the year
2. Deduct any allowable expenses such as property maintenance and repairs
3. Deduct the depreciation allowed on the property
4. Calculate the net rental income
5. Apply the tax rate applicable to your income slab

For example, if your rental income is Rs. 3,000,000 and you have allowable expenses of Rs. 500,000 and depreciation of Rs. 100,000, then your net rental income would be Rs. 2,400,000. As your income falls within the Rs. 2,400,001 to Rs. 4,800,000 income slab, your tax rate would be 10%. Therefore, the tax on your rental income would be Rs. 240,000 (10% of Rs. 2,400,000).

Tax-Filing Process

The tax-filing process for rental income is similar to the process for any other income source. You need to file your tax return by the due date, which is usually September 30th of the following year. You can file your tax return online or manually.

To file your tax return, you need to include your rental income under the “income from property” section. You also need to provide details of any allowable expenses and depreciation. Once you’ve calculated your net rental income and tax liability, you can pay the tax online or by visiting a designated bank branch.