# Tax on rental income in Pakistan (2026-27): rates, withholding by tenants and filing

URL: https://which.pk/business/guides/rental-income-tax-pakistan/
Author: Ahtisham
Updated: 20 Oct 2026

## Summary

For 2026-27, an individual's rent has no separate tax table. It is taxed as 'Income from Property', reduced by deductions such as a one-fifth repairs allowance, and added to your other income. The non-salaried slabs then apply, from 0% up to Rs 6 lakh to 45% above Rs 56 lakh, unless salary is over 75% of your taxable income. Companies, schools, clinics and some other tenants must deduct tax from rent above Rs 3 lakh a year, doubled for non-filers.

## Key facts

- Tax-free band (non-salaried): Rs 6 lakh a year
- Repairs allowance: One-fifth of the rent
- Tenant withholding: Nil up to Rs 3 lakh rent a year
- Non-filer withholding: Double the rate

For **rental income tax in Pakistan** in 2026-27, an individual landlord has no separate rent table. Your rent, less deductions such as a **one-fifth repairs allowance**, is added to your other income and taxed at the normal slabs: **0% up to Rs 6 lakh** a year, rising to 45% above Rs 56 lakh for non-salaried income. Some tenants, such as companies and schools, must also deduct tax from the rent they pay you.

## How is rental income taxed in Pakistan?

Rent is taxed under the head **"Income from Property"** (section 15 of the Income Tax Ordinance). Until 2021, individuals paid tax on rent at a separate rate table. The Finance Act 2021 removed it, so now your taxable rent joins your salary, business or other income and is taxed on one scale.

What counts as rent:

- any amount you receive for the use of land or a building
- a **non-refundable advance** that isn't adjusted against the rent, spread equally over 10 tax years (section 16)
- a forfeited deposit under a sale contract

Charges in the rent for utilities, amenities or services are taxed separately as "Income from Other Sources". If you charge less than the market rent, the law treats you as receiving the **fair market rent**, unless your tenant is your employee and is taxed on it as salary.

## Which tax slab applies to rental income in 2026-27?

The table depends on how much of your taxable income is salary:

- **Salary more than 75% of your taxable income:** the salaried table applies to everything, rent included.
- **Otherwise** (retirees, business owners, landlords with only rent, or salaried people with a lot of rent): the non-salaried table applies to everything, salary included.

Non-salaried table for tax year 2027 (1 July 2026 to 30 June 2027), unchanged by the Finance Act 2026:

| Annual taxable income | Tax |
|---|---|
| Up to Rs 6 lakh | 0% |
| Rs 6 lakh to Rs 12 lakh | 15% of the amount above Rs 6 lakh |
| Rs 12 lakh to Rs 16 lakh | Rs 90,000 + 20% above Rs 12 lakh |
| Rs 16 lakh to Rs 32 lakh | Rs 1.7 lakh + 30% above Rs 16 lakh |
| Rs 32 lakh to Rs 56 lakh | Rs 6.5 lakh + 40% above Rs 32 lakh |
| Above Rs 56 lakh | Rs 16.1 lakh + 45% above Rs 56 lakh |

Individuals with taxable income above **Rs 1 crore** also pay a 10% surcharge on their income tax, unless they have any salary income (section 4AB). The salaried table, with lower rates, is in [income tax slabs 2026-27](/business/guides/income-tax-slabs-2026-27/).

## What can I deduct from rental income?

Section 15A allows these deductions before tax is worked out:

| Deduction | Limit |
|---|---|
| Repairs allowance | One-fifth of the rent, no receipts needed |
| Building insurance premium | Actual amount |
| Property tax and other local charges on the property (not income tax) | Actual amount |
| Ground rent | Actual amount |
| Profit or interest on a loan or mortgage to buy, build or renovate the property | Actual amount |
| Rent share paid to HBFC or a bank under a rent-sharing scheme | Actual amount |
| Other costs of earning the rent, such as collection | Up to 4% of the rent |
| Legal costs to defend your title or a suit about the property | Actual amount |
| Rent you can't recover from a tenant who has left | Under conditions |

Property tax is a separate provincial charge, paid to the excise department, on top of income tax. For Punjab's rates, see [property tax in Punjab](/property/guides/property-tax-punjab/).

## How much tax will I pay? Three examples

Our calculations, using the tax year 2027 tables and only the one-fifth repairs allowance:

| Landlord | Rent a year | Taxable rent | Table used | Tax a year |
|---|---|---|---|---|
| Retiree, no other income, house let at Rs 50,000 a month | Rs 6 lakh | Rs 4.8 lakh | Non-salaried | Rs 0 |
| Retiree, no other income, house let at Rs 1 lakh a month | Rs 12 lakh | Rs 9.6 lakh | Non-salaried | Rs 54,000 |
| Salary Rs 1.5 lakh a month plus a portion let at Rs 40,000 a month | Rs 4.8 lakh | Rs 3.84 lakh | Salaried (salary is 82%) | Rs 114,240 in total, Rs 42,240 more than on salary alone |

**Salary Rs 1.5 lakh a month plus two portions let at Rs 50,000 each:** Rs 5.18 lakh tax, up from Rs 72,000 (Rent Rs 12 lakh a year, taxable Rs 9.6 lakh. Salary of Rs 18 lakh is 65% of the Rs 27.6 lakh total, under 75%, so the non-salaried table applies to all of it: Rs 1.7 lakh + 30% of Rs 11.6 lakh. Our calculation.)

The jump in the last case is the **75% rule**. With only the repairs allowance, your salary stays above 75% while your taxable rent is less than a third of your salary.

## Who deducts tax from rent, and at what rate?

Under section 155, these tenants must deduct tax from the gross rent they pay you, including advances and payments for furniture, fixtures and related services:

- federal, provincial and local governments
- companies
- non-profit organisations and charities
- foreign diplomatic missions
- private schools and colleges, hospitals, clinics, maternity homes, boutiques and beauty parlours
- **individuals or AOPs paying Rs 15 lakh or more** in rent a year
- anyone else FBR notifies

An ordinary family renting your house for less than Rs 15 lakh a year doesn't deduct anything.

Rates for an individual or AOP landlord, tax year 2027, from FBR's rate card and the Ordinance:

| Gross rent a year | Tax deducted (filer) |
|---|---|
| Up to Rs 3 lakh | Nil |
| Rs 3 lakh to Rs 6 lakh | 5% of the amount above Rs 3 lakh |
| Rs 6 lakh to Rs 20 lakh | Rs 15,000 + 10% above Rs 6 lakh |
| Above Rs 20 lakh | Rs 1.55 lakh + 25% above Rs 20 lakh |

A company landlord has 15% deducted, or 30% if it isn't on the Active Taxpayers List (ATL, FBR's list of filers).

**Company tenant paying Rs 1 lakh a month:** Rs 75,000 deducted a year (Rs 15,000 + 10% of Rs 6 lakh, for a filer landlord. Our calculation from the rate card. A non-filer has Rs 1.5 lakh deducted.)

**The deduction isn't your final tax.** The law stopped treating it as final in 2010. You add the rent to your return, work out your tax on the slabs, and take the amount deducted as a credit (section 168).

## Do non-filers pay more tax on rent?

Yes, on the deduction. The Tenth Schedule of the Ordinance **doubles** withholding rates for anyone not on the ATL, and section 155 has not been exempt from that rule since 2021. So a non-filer landlord renting to a company at Rs 1 lakh a month has Rs 1.5 lakh deducted a year instead of Rs 75,000.

**FBR's rate card leaves this blank:** FBR's 2026-27 withholding rate card shows a non-filer rate of 30% for company landlords, but leaves the non-filer column blank for individuals. Its own reference column points to the Tenth Schedule rule that doubles the rate, and the card says the Ordinance prevails. We follow the Ordinance.

To get on the list, see [how to become a filer](/business/guides/how-to-become-filer/) and [filer vs non-filer](/business/guides/filer-vs-non-filer/).

## Is there still a tax on owning a second property?

No. Since 2022, section 7E taxed a deemed income of 5% of the fair market value of certain property, at 20%. KPMG reports that the Federal Constitutional Court declared it unconstitutional on **6 May 2026**, and the Finance Act 2026 removed it. KPMG notes the law sets out no automatic refund for tax already paid under it.

## How do I declare rental income in my tax return?

You must file if your taxable income is above the tax-free amount. You must also file if you own a plot or house of **500 square yards or more**, own a flat in a city, cantonment or Islamabad, or have an NTN, even if no tax is due. See [how to file an income tax return](/business/guides/how-to-file-income-tax-return/).

Building or splitting a house to let? [Double unit house or whole house: which earns more rent](/property/guides/building-a-house-to-rent-out/) compares the rents. Write the terms down first: [rent agreement in Pakistan](/property/guides/rent-agreement-pakistan/).

More guides: [income tax calculator](/business/tools/salary-tax-calculator/), [how to check filer status](/business/guides/how-to-check-filer-status/), [Business & Trade](/business/).

## Questions people ask

### Is rental income taxable in Pakistan?

Yes. Rent is taxed under the head 'Income from Property' in section 15 of the Income Tax Ordinance. For an individual it is added to other income and taxed at the normal slabs, after deductions such as the one-fifth repairs allowance.

### What is the rental income tax slab for 2026-27?

Individuals have had no separate rental slab since 2021. Taxable rent goes into the non-salaried table: 0% up to Rs 6 lakh a year, 15% to Rs 12 lakh, rising to 45% above Rs 56 lakh. If salary is more than 75% of your taxable income, the salaried table applies instead.

### Who deducts withholding tax on rent?

Companies, government bodies, non-profits, private schools, hospitals, clinics, maternity homes, boutiques, beauty parlours, and individuals paying Rs 15 lakh or more rent a year (section 155). It's nil on the first Rs 3 lakh of annual rent and is credited against your tax when you file.

### Is there a rental income tax exemption in Pakistan?

The old exemption for individuals with up to Rs 2 lakh of property income and no other income was removed in 2021. If your taxable rent is your only income and stays under Rs 6 lakh a year after deductions, the 0% band means no tax is due.

## Sources

- [Income Tax Ordinance, 2001 (amended up to 30 June 2026)](https://download1.fbr.gov.pk/Docs/2026724177725705IncomeTaxOrdinanace2001.pdf), FBR (accessed 20 Oct 2026)
- [Withholding Income Tax Rate Card, updated up to 30 June 2026 as per Finance Act 2026](https://download1.fbr.gov.pk/Docs/202681113864992WithholdingTaxRatesCard2027.pdf), FBR (accessed 20 Oct 2026)
- [A Brief of Finance Act, 2026](https://kpmg.com/content/dam/kpmgsites/pk/pdf/2026/07/A%20Brief%20of%20Finance%20Act%202026.pdf.coredownload.inline.pdf), KPMG Taseer Hadi & Co. (accessed 20 Oct 2026)