Tax on Rental Income From Property
Rent from property you own is taxable income in Pakistan. This surprises a number of landlords, particularly those who let a single flat or shop and think of it as a private arrangement.
The tenant may be withholding tax already
Certain categories of tenant are required to deduct tax when they pay rent and hand it to the government on your behalf. Companies, government bodies and other prescribed persons fall into this group. An individual renting a house for their own family generally does not.
If tax is being withheld from your rent, ask the tenant for the deduction certificate. That is your evidence for claiming it in your return, and without it you may end up paying tax on the same rent twice.
It goes in your return either way
Whether or not anyone withheld tax, the rent is income and belongs in your return. Property is visible. A flat that generates rent and a wealth statement that never mentions any rental income is an obvious mismatch.
What you can deduct
Income from property is not taxed on the gross rent alone. The Ordinance allows deductions against it, and historically these have included:
- A repairs allowance calculated as a proportion of the rent
- Property tax and other local rates paid on the property
- Insurance premiums on the building
- Interest on money borrowed to acquire, construct or improve the property
- Ground rent, where applicable
- Certain collection and administration costs
The exact list and the way the repairs allowance is computed have been amended over the years, and the treatment of rental income has moved between separate and normal tax treatment more than once. Confirm the rules for the tax year you are filing.
Advance rent and deposits
A large advance covering several years is not always taxed entirely in the year you receive it, and a refundable security deposit is generally not rent at all. These are the points landlords most often get wrong, in both directions. If a tenant has paid you a substantial sum up front, it is worth getting the treatment right rather than guessing.
Getting the withholding back
Where a tenant is required to deduct tax from your rent, that money has already gone to the government under your name. Whether it does you any good depends entirely on paperwork.
- Ask for the deduction certificate, and ask during the year rather than at filing time. A corporate tenant will issue one; chasing a former tenant in September is a different task.
- Check the name and the amount on it. A deduction recorded against the wrong person is not one you can claim.
- Declare the gross rent, then claim the deduction against the bill. Declaring the net figure you actually received understates your income and loses you the credit at the same time.
The failure mode here is quiet and expensive: rent is taxed, tax was withheld on it, and the landlord never claims the withholding because nobody gave them a certificate. It is the same money either way — the difference is whether it comes back to you.
Property is the least concealable income there is
A flat has an address, a registration record, a utility connection and, if it is let, a tenant. It also has to appear in your wealth statement, at cost and with the year you acquired it.
So a return that declares the property but no rental income is making a claim that is easy to test, and it sits in the same document as the asset itself. If a property is genuinely vacant or occupied by family, that is a normal state of affairs — but it is worth being able to say so, rather than leaving an obvious question unanswered. See the wealth statement.
Common questions
I rent one flat to a family. Is that really taxable?
Yes. The size of the arrangement does not change its character. What changes is whether anyone is withholding tax on it — an individual tenant renting for their own family generally is not, which means nothing has been paid and the whole amount is dealt with in your return.
Is a security deposit rent?
A genuinely refundable deposit is generally not rent. A large advance covering several years is a different question and is not always taxed entirely in the year you receive it. These are the two points landlords most often get wrong, in both directions.
Can I deduct what I spent on repairs?
The Ordinance allows deductions against property income, and historically a repairs allowance computed as a proportion of the rent rather than your actual spend. The way it is computed has been amended more than once — confirm the rule for the tax year you are filing.
I live abroad and rent out a house here. Does this apply?
Yes. Rent from Pakistani property is Pakistan source income and stays taxable here whether or not you are resident. See residency and what it decides.
Last updated: 28 July 2026
Sources
- Income Tax Ordinance 2001, sections 15 and 15A (income from property and deductions)
- Income Tax Ordinance 2001, section 155 (deduction of tax on rent)
- FBR, withholding tax on property income, Federal Board of Revenue (fbr.gov.pk)
- PwC Tax Summaries, Pakistan income from property
This article gives general information about tax in Pakistan. It is not advice on your own situation. Rules and rates change, sometimes in the middle of a year. Before you act on anything here, check the current position with the FBR or a registered tax practitioner.
