Introduction

Renting out a house, flat, shop or office can bring steady income, but in Pakistan it also brings a tax obligation that many landlords only notice when FBR does. Rent is not taxed through a separate “rent tax”. It is added to your other income and taxed at slab rates, and in some cases your tenant must also deduct tax before paying you.

This is where confusion starts. The tax on your net rent, the tax your tenant may withhold and the provincial property tax on the building are three different things. Mixing them up can mean overpaying, claiming the wrong credit or filing a return that does not match FBR’s records.

This guide explains how rental income is taxed for Tax Years 2026 and 2027, how to calculate it with worked examples, which deductions you can claim and how to declare rent on IRIS. It also covers the 2026 changes, including the end of the deemed rental income tax under Section 7E.

Quick Answer

Rent you receive from property in Pakistan is taxed under Section 15 of the Income Tax Ordinance, 2001, as "Income from Property". You deduct allowable expenses, add the net figure to your other income, and pay tax at the normal slab rates when you file your return on IRIS. Certain tenants must also withhold tax from the rent.

• Rent is added to your total income; there is no separate "rent tax" table.
• Non-salaried individuals and AOPs pay 0% up to Rs 600,000, rising in steps to 45%. Salaried individuals use lower slabs.
• A repair allowance of one-fifth of the rent, plus other Section 15A deductions, reduces taxable rent.
• Tax withheld by a tenant under Section 155 is adjustable, so claim it as credit in your return.
• The Tax Year 2026 return deadline was extended to 15 October 2026.

What is rental income tax in Pakistan?

Pakistan has no standalone rent tax. Under Section 15, rent received or receivable in a tax year is chargeable under the head "Income from Property". It then joins your other income (salary, business, profit on debt and so on) and is taxed at the slab rates for your category.

The Ordinance once had a dedicated rate table for property income (Division VIA of the First Schedule). The Ordinance's contents page shows it was omitted by the Finance Act 2021, which is why rent now simply flows into total income.

What counts as rent

• Rent: any amount received or receivable by the owner for the use or occupation of land or a building, including a deposit forfeited under an agreement to sell.
• Not property income: a building leased together with plant and machinery, and amounts for amenities, utilities or services linked to the letting, fall under "Income from Other Sources".
• Below-market rent: if you charge less than fair market rent, the law generally treats you as having earned the fair market rent for the period let, unless that value is already taxed in the tenant's salary.
• Non-adjustable deposits (Section 16): an amount from a tenant that is not adjustable against rent is treated as rent in the year received and the following nine tax years, in equal parts.

These rules are summarised from the Ordinance's Sections 15 and 16; read the full text if your arrangement is unusual.

Security deposits: when they become taxable

A normal refundable security deposit is not rent. Section 16 applies only to amounts from a tenant that are not adjustable against rent.

Such an amount is treated as rent in the year you receive it and in each of the following nine tax years, in equal parts. That spreads the tax over ten years instead of one.

If you refund the amount to the tenant before the ten-year period ends, the Ordinance has specific rules for how the refund and any new non-adjustable amount from the next tenant are treated. Check these rules in Section 16 of the Income Tax Ordinance, or ask your adviser, before you refund or re-let.

Practical tips:

• Say in the tenancy agreement whether a deposit is refundable or adjustable.
• Record each non-adjustable amount with its date and the tenant’s name.
• Remember that “gross rent” for Section 155 purposes includes Section 16 amounts, so your tenant may need to deduct tax on them. See ICT’s withholding tax guide.

Is rental income taxable in Pakistan?

Yes. Rent from land or buildings is chargeable to tax unless an exemption in the Ordinance applies. Ordinary residential or commercial letting has no blanket exemption.

One common confusion needs clearing up. You will see claims that rent up to Rs 300,000 a year is "tax-free". That figure appears in the Section 155 withholding table (below), where it means a tenant deducts nothing on that much rent. For your annual liability, the zero-rate band is the first Rs 600,000 of total taxable income. The Section 15 and 15A provisions, as summarised for Tax Year 2027, contain no separate Rs 300,000 exemption.

Whether you must file at all depends on your wider position. See ICT's guide on who must file an income tax return in 2026.

Why Rental Income Tax Matters More in 2026

Rental income has been taxable for years, but 2026 makes careful reporting more important for three reasons.

1. The rules moved in both directions. The Finance Act 2026 left rent withholding rates and the non-salaried slabs unchanged, but it cut several salaried slabs from Tax Year 2027. That makes your tax category (salaried or non-salaried) a bigger factor in how much tax your rent attracts. See ICT’s summary of Budget 2026-27 tax changes.

2. The deemed rental income tax has gone. Section 7E, which taxed 5% of a property’s value as deemed income, was set aside by the Federal Constitutional Court and omitted by the Finance Act 2026. Tax is now due on rent you actually earn. ICT’s Section 7E explainer covers what this means for past notices.

3. FBR is building more data and digital tools. The Finance Act 2026 added faceless assessment and audit frameworks, an algorithmic settlement mechanism and automated reporting from banks for large accounts. Mismatches between your return, your tenants’ withholding statements and your bank data are easier to spot. Read more in ICT’s guides on FBR audit notices and digital tax audits.

The practical lesson is simple: declare gross rent, claim only supportable deductions and match tenant withholding to your records before you file.

FBR Rental Income Tax Slabs for Tax Year 2025–26

Tax Year 2026 covers rent earned between 1 July 2025 and 30 June 2026. This is the year for which returns are being filed now. Two tables matter: the slabs that decide your annual tax, and the Section 155 table that decides what a tenant deducts.

Annual tax slabs for Tax Year 2026

Non-salaried individuals and AOPs (the Finance Act 2026 did not change these rates):

Salaried individuals (salary above 75% of taxable income), Tax Year 2026:

A 10% surcharge applies to non-salaried individuals and AOPs with taxable income above Rs 10 million.

Section 155 withholding slab

For individual and AOP landlords, FBR’s rate card for Tax Year 2027 shows: nil up to Rs 300,000; 5% of the amount over Rs 300,000 up to Rs 600,000; Rs 15,000 plus 10% up to Rs 2,000,000; and Rs 155,000 plus 25% above that. Before relying on it for a Tax Year 2026 payment, check the card FBR published for that year on FBR’s website.

Not sure which slab table you fall under? Compare them in ICT’s guides on income tax slabs in Pakistan for 2026 and the 2025-26 slabs.

Rental income tax rates for 2026 and 2027

For the Tax Year 2026 return (rent from 1 July 2025 to 30 June 2026) and Tax Year 2027 (1 July 2026 to 30 June 2027), the rate depends on whether you are salaried or not.

Slab rates for non-salaried individuals and AOPs

The Finance Act 2026 did not change these rates, so the table below applies to both years.

An AOP that is a professional firm barred from incorporating pays 40% instead of 45% in the top band. A landlord whose main income is rent usually falls in this table.

Slab rates when you are salaried

If your salary is more than 75% of your taxable income, the salaried slabs apply to your whole taxable income, including rent. The Finance Act 2026 cut several salaried rates from Tax Year 2027.

Each rate applies to the amount above the lower limit of its band. For the full tables and examples, see ICT's salaried income tax slabs guide and its overview of income tax slabs in Pakistan for 2026.

Surcharge and companies

A 10% surcharge on the income tax applies to individuals and AOPs whose taxable income exceeds Rs 10 million (Section 4AB). The Ordinance now states that no surcharge is payable by an individual deriving salary income.

Companies are taxed at corporate rates, not the individual slabs. The 15% figure in FBR's rent withholding card for companies is a deduction at source, covered next.

Section 155: tax withheld by your tenant

Section 155 makes certain tenants deduct tax from the gross rent and deposit it with FBR. "Gross rent" includes advance payments, rent of furniture and fixtures, amounts for related services and non-adjustable amounts under Section 16.

Who must deduct

The Ordinance defines "prescribed persons". They include:

• Federal, provincial and local governments
• Companies
• Non-profit organisations and charitable institutions
• Diplomatic missions
• Private educational institutions, boutiques, beauty parlours, hospitals, clinics and maternity homes
• Individuals or AOPs paying gross rent of Rs 1.5 million or more in a year (Rs 125,000 a month)
• Anyone else notified by FBR

So a family renting a home at Rs 80,000 a month deducts nothing. A clinic paying the same rent does.

Withholding rates for Tax Year 2027

These come from FBR's rate card, updated to 30 June 2026.

Where the landlord is a company, the card shows a flat 15% if it is on the Active Taxpayer List (ATL) and 30% if not.

For individuals and AOPs, the card prints a single slab table and no separate non-ATL rate. Some websites say non-filer landlords pay double. We could not confirm that from the card, so check with a qualified adviser before deducting at any other rate. ICT's explainers on filer and non-filer status and the Active Taxpayer List show how status affects other taxes.

Filer vs Non-Filer Rental Tax Rates

Many landlords ask whether non-filers pay more tax on rent. The answer depends on which tax you mean.

What FBR’s card shows for rent

• Company landlords: 15% if on the Active Taxpayer List (ATL) and 30% if not.
• Individual and AOP landlords: the card prints one slab table with no separate non-ATL rate.

Some websites state that non-filer landlords pay double. We could not confirm that for individuals and AOPs from FBR’s card, so speak to a qualified adviser before deducting or paying at any other rate.

Where filer status clearly changes your tax bill

If you own property, status affects other taxes on the same asset. From FBR’s Tax Year 2027 card:

The Finance Act 2026 also abolished the separate higher rates for “late filers”, so persons on the ATL who filed late are charged the ordinary ATL rates on these property taxes.

How to improve your position

1. File your return on time.
2. Check your ATL status.
3. Understand the difference between filer and non-filer.
4. See the wider picture in ICT’s guide to non-filer tax rates in Pakistan and FBR non-filer penalties.
5. If you are not yet registered, start with how to become a filer.

Is the deducted tax final?

No. Section 155 tax is treated as adjustable. You still declare the full gross rent and count the tax deducted as tax already paid. In practice:

1. Ask the tenant for evidence of each deduction (a certificate under Section 164) and confirm it appears in your IRIS records.
2. Claim only credit that is verifiably deducted and deposited. The Finance Act 2026 reportedly added a penalty equal to the excess where a person claims more credit than was actually deducted and deposited.
3. If withholding will exceed your real liability, you may apply for a lower-rate or exemption certificate under Section 159, or claim the excess back later through the refund process on IRIS.

Tenants should also understand their own side. ICT explains it in its guides on withholding tax and the Section 165 withholding statement.

What if tenant withholding does not cover your tax?

Tax withheld by a tenant under Section 155 only covers rent paid by prescribed persons. If your tenants are individuals paying below Rs 1.5 million a year, nothing is withheld, and your full liability falls due when you file.

In that situation, the Ordinance’s advance tax provisions (Section 147) may require you to pay tax in instalments during the year. Whether this applies to you depends on your tax history and income mix, so confirm it with a qualified adviser before the year starts. Missing a required instalment can add default surcharge.

Keep your working papers together with your income tax return documents, and use ICT’s Pakistan tax calendar to track payment dates.

How to calculate rental income tax in Pakistan

Gross rent vs net rental income

• Gross rent is everything received or receivable for the year, including advances and Section 16 amounts. Section 155 withholding is worked out on this figure.
• Net rental income is gross rent less Section 15A deductions. This is what is added to your total income and taxed on the slabs.

That is why the tenant’s deduction can be higher than your final tax. In the Rs 100,000 monthly example, Rs 75,000 is withheld on Rs 1,200,000 gross rent, while the annual tax on Rs 960,000 net rent is Rs 54,000.

Follow these steps for each tax year:

1. Add up gross rent received or receivable, including advances and any Section 16 amount for the year.
2. Check fair market rent if you let to a relative or at a below-market price.
3. Subtract Section 15A deductions to reach net rental income.
4. Add your other income (salary, business, profit on debt not taxed finally, and so on).
5. Apply the correct slab table to total taxable income.
6. Subtract credits, including Section 155 tax deducted by tenants, then pay any balance.

Allowable deductions under Section 15A

FBR's rules for Tax Year 2027 allow:

• Repairs allowance: one-fifth (20%) of the rent chargeable for the building, computed before other Section 15A deductions. It is a fixed allowance, so you do not need repair bills to claim it.
• Insurance premiums to cover damage or destruction of the building
• Local rates, taxes, charges or cess paid to a local authority or government (not income tax)
• Ground rent
• Profit paid on money borrowed to buy, build, renovate, extend or rebuild the property, including mortgages
• Expenditure incurred wholly and exclusively to earn the rent, including administration and collection costs, limited to 4% of the rent chargeable
• Legal costs of defending title or property-related court proceedings
• Unpaid rent that is reasonably irrecoverable, if the prescribed conditions are met

The same expense cannot be claimed under Section 15A and under another head. Rent you later recover after claiming it as unpaid becomes taxable when received.

Worked examples

The examples below are illustrations using the Tax Year 2026/2027 non-salaried slabs. They assume rent is the only income, no surcharge applies and all deduction conditions are met.

Example 1: Rs 100,000 a month. Gross rent is Rs 1,200,000. The 20% repairs allowance is Rs 240,000, leaving Rs 960,000. Tax is 15% of (960,000 - 600,000), which is Rs 54,000.

If the tenant is a prescribed person, Rs 75,000 is withheld (15,000 + 10% of 600,000). That is Rs 21,000 more than the liability, which you can adjust or claim back.

Example 2: Rs 150,000 a month with a mortgage. Gross rent is Rs 1,800,000. Deductions: repairs Rs 360,000, local tax Rs 20,000, insurance Rs 15,000, mortgage profit Rs 300,000 and agent fees Rs 60,000 (within the 4% cap of Rs 72,000). Total deductions are Rs 755,000, so net rent is Rs 1,045,000. Tax is 15% of 445,000, which is Rs 66,750.

Example 3: Rs 250,000 a month. Gross rent is Rs 3,000,000. After the Rs 600,000 repairs allowance, net rent is Rs 2,400,000. Tax is 170,000 + 30% of 800,000, which is Rs 410,000. Section 155 withholding would be Rs 405,000 (155,000 + 25% of 1,000,000).

Quick reference by monthly rent

Assumptions as above: rent only, repairs allowance only.

Your real figure will differ if you have other income, more deductions, or salaried status.

How to File Rental Income Tax Return with FBR

You report rent in your annual income tax return on FBR’s IRIS portal. Follow this order to avoid mismatches.

Before you start

• Confirm you have an NTN and working IRIS access. See ICT’s NTN guide and IRIS registration guide. If you cannot log in, try IRIS login problems and solutions.
• Total your gross rent for the tax year and note every tenant’s withholding.
• Collect deduction evidence for repairs, insurance, mortgage profit, local taxes and agent fees.

Step-by-step filing

1. Log in to IRIS and open the return for the correct tax year. Rent from July 2025 to June 2026 belongs in Tax Year 2026.
2. Enter rent and deductions in the income from property section.
3. Add other income such as salary or business income, and confirm total taxable income.
4. Claim tax credits, including Section 155 tax deducted by tenants. Claim only what appears in FBR’s records.
5. Update your wealth statement so property, cash and loans reconcile with your declared income. See the wealth statement guide.
6. Pay any balance through a PSID. See how to generate a PSID.
7. Submit and save the acknowledgement and working papers.

Labels and screens differ between IRIS versions. ICT’s IRIS 2.0 return filing errors and solutions page covers common problems. For a general walkthrough, see steps to file an income tax return in 2026.

Deadline and corrections

FBR extended the Tax Year 2026 deadline to 15 October 2026. Check FBR’s website for any further extension. If you need to correct a filed return, read how to revise an income tax return on IRIS.

Special situations

Several properties or co-owners

Add the net rent from every property into one total. Do not report each property as a separate tax calculation. Where owners share a property, the Ordinance's joint-ownership rules (Section 66) govern how income is attributed, so agree ownership shares before filing and confirm the treatment with a professional.

Commercial versus residential rent

Both are "Income from Property" and use the same slabs. What changes in practice is who the tenant is. Companies, clinics, schools and boutiques are prescribed persons, so commercial landlords more often see Section 155 deductions. Commercial lettings also more often involve large non-adjustable deposits, which fall under Section 16.

Guest houses, short-term lets and furnished property

Ordinary letting of a building is “Income from Property”. Some arrangements move out of that head:

• A building leased together with plant and machinery is taxed as Income from Other Sources.
• Amounts charged for amenities, utilities or services linked to the letting are also Income from Other Sources.

A guest house, serviced apartment or short-term rental that provides daily services may be treated differently from a plain tenancy. If you run it as an organised activity, the income may fall under business rather than property. The right head changes your deductions and your return, so get it checked.

For business treatment, see ICT’s business tax guide and how to file a business income tax return on IRIS.

Farmland: agricultural income has its own rules in Section 41 of the Ordinance and provincial law. Do not assume a farmland lease follows the building rules above.

Overseas Pakistanis receiving rent from Pakistan

Rent from land or buildings in Pakistan is generally Pakistan-source income, wherever you live. Your residency status for the tax year decides how it is taxed and how you file, so work that out first.

Points to check:

• Residency: whether you are resident or non-resident under the Ordinance for that year.
• Filing: certain holders of special rupee and foreign currency accounts (such as NRVA) are exempt from some filing requirements. Professional summaries of the Finance Act 2026 say this exemption is not available where you have Pakistan-source taxable income beyond specified categories. Rent can therefore take you outside it, so verify your position.
• Tenant withholding: a prescribed-person tenant may still deduct tax under Section 155.
• Double taxation: your country of residence may also tax the rent. A tax treaty or foreign tax credit may help. See ICT’s guides on cross-border tax compliance and double taxation relief.

If a relative or agent collects the rent for you, keep bank records showing where it went. Your wealth statement and return should still reconcile.

Real estate professionals

If you earn commission rather than rent, a different regime applies. See ICT's tax guide for real estate agents.

Rental income vs business income

The test is the nature of the activity, not the label. Simple letting stays under Section 15. Added services, plant or an operating business can change it. See ICT’s Income Tax Ordinance compliance guide.

Rental income tax versus other property taxes

Related guides: Sections 236C and 236K, capital gain tax, the property tax calculator guide and ICT's overview of excise and taxation.

What happens if rental income is not declared?

The Ordinance defines concealment of income to include suppressing a taxable receipt or failing to disclose income chargeable to tax, unless it is shown that the taxpayer did not act knowingly and wilfully (Section 2(13AA)). Penalties and an assessment of the unpaid tax can follow.

Professional summaries of the Finance Act 2026 report that the penalty for a false or misleading statement rose to Rs 500,000 or 100% of the tax shortfall, whichever is higher. Verify the current figure in Section 182 before quoting it.

Can FBR detect undeclared rent? It can learn about rent from several sources, including withholding statements filed by corporate tenants and bank data. The Finance Act 2026 also created a framework for banks to report large accounts for automated cross-matching. Whether any single landlord is detected is unpredictable, so do not rely on going unnoticed.

If FBR writes to you, read ICT's explainers on FBR notices, responding to a Section 114 notice and tax audits.

Common mistakes landlords make

• Declaring only the amount received after tenant withholding instead of gross rent
• Treating the Rs 300,000 withholding limit as an annual exemption
• Forgetting the 20% repairs allowance, or claiming the same cost twice
• Ignoring non-adjustable deposits under Section 16
• Claiming credit for tax that tenants never deposited
• Using the wrong tax year's slabs, or the wrong salaried or non-salaried table
• Not updating the wealth statement after buying or letting a property

More errors to avoid are in ICT's income tax return filing mistakes guide.

Practical tips

• Use a dedicated bank account for rent and keep a monthly ledger.
• Put the tax treatment in writing in the tenancy agreement, including who bears withholding.
• Request withholding evidence every month or quarter and match it to IRIS.
• Set aside part of each rent payment for the year-end balance.
• Review your position every July, because Finance Acts change slabs and rules.

What changed in 2026

• Rates: the Finance Act 2026 left rent withholding rates and non-salaried slabs unchanged, while cutting several salaried slabs.
• Section 7E: the Federal Constitutional Court set aside the deemed income tax in May 2026, and the Ordinance now shows the section as omitted. Business Recorder reported the court's reasoning. ICT's Section 7E explainer covers refunds.
• Budget context: see ICT's summary of Budget 2026-27 tax changes.

Why Choose ICT to Learn Rental Income Tax and FBR Compliance in Pakistan?

Reading a guide helps you understand the rules. Applying them to real rent, real withholding and a real IRIS return is a skill you build with structured training. The Institute of Corporate and Taxation (ICT) teaches taxation and compliance for people who want to do this work properly.

Here is what ICT offers learners who want to handle property income and FBR filing:

• Taxation courses built around FBR practice. ICT runs programmes such as the Certified Tax Advisor course and the Advanced Taxation and Litigation course, which suit anyone preparing returns, withholding statements or responses to notices.
• Current, topic-by-topic guidance. ICT publishes up-to-date guides on IRIS, income tax return filing, withholding tax and FBR notices, so what you read links back to what you learn.
• Verifiable certificates. ICT provides an online certificate verification page, which helps employers and clients check your credentials.
• A choice of study formats. If you are unsure whether to study online or in person, ICT compares them in its guide on online vs physical tax courses.
• Clear next steps. Not sure which course fits? Compare options on ICT’s courses page or contact the team.

Whether you manage your own rental portfolio or want to advise landlords, ICT’s training helps you move from reading the law to applying it.

FAQs

Is rental income taxable in Pakistan? Yes. Rent is taxed under Section 15 as Income from Property and must be declared in your return.

Who pays tax on rent, the landlord or the tenant? The landlord owes the tax. Certain tenants, such as companies, clinics and schools, must deduct Section 155 tax and deposit it for the landlord.

How much tax do I pay on Rs 100,000 monthly rent? If rent is your only income and you claim only the repairs allowance, the tax is Rs 54,000 a year on the non-salaried slabs. Other income or deductions change this.

Is any rental income tax-free? The first Rs 600,000 of total taxable income is taxed at 0%. The Rs 300,000 figure is the nil band in the tenant withholding table, not an annual exemption.

What expenses can I deduct? The 20% repairs allowance, insurance, local taxes, ground rent, mortgage profit, capped collection costs, legal costs and some irrecoverable rent.

How do I declare rental income to FBR? File your income tax return on IRIS, enter rent and deductions in the income from property section, claim withholding credits and update your wealth statement.

Is tax deducted by my tenant final? No. It is adjustable against your total liability.

Is commercial rent taxed differently? Not in rate. Both types use the same slabs, though commercial tenants are more likely to be required to withhold tax.

Is rental income tax the same as property tax? No. Property tax is a provincial levy on the building. Rental income tax is an FBR tax on your net rent.

What if I missed the 2026 deadline? File as soon as possible and check the surcharge and ATL consequences. Seek professional advice if there are undeclared past years.

Do I have to pay advance tax on rent?
It depends on your tax history and whether tenants withhold tax. Confirm with an adviser before the year begins.

Is a security deposit taxable?
Not if it is refundable. A non-adjustable amount is taxed as rent over ten tax years under Section 16.

Do overseas Pakistanis pay tax on rent in Pakistan?
Rent from Pakistani property is generally Pakistan-source income. Your residency status decides how it is taxed and filed.

Is Airbnb or guest-house income rental income?
Not always. Services and operations can move it into business or other-sources income, so get the classification checked.

Conclusion

Rent is taxed as part of your total income, after allowable deductions, at the slab rates that match your status. A tenant's Section 155 deduction is an advance payment you claim as credit, not a replacement for filing. The safest approach is simple: record gross rent, claim only the deductions you can support, match tenant withholding to IRIS and keep your wealth statement consistent.

If you want to prepare property-income returns, withholding statements and FBR replies with confidence, whether for your own portfolio or for clients, explore ICT's Certified Tax Advisor course. For notices, appeals and disputes, look at the Advanced Taxation and Litigation course, or contact ICT for syllabus, fees and schedules.

Why Choose ICT for Property Income Tax Training?

If you want to prepare rental income returns, claim withholding credits correctly and respond to FBR with confidence, ICT’s Certified Tax Advisor course is a practical place to start. For notices, assessments and appeals, consider the Advanced Taxation and Litigation course. You can also check any ICT credential through the certificate verification page or ask about syllabus, fees and schedules through ICT’s contact page.