How rent is taxed
Rent from a house, flat, shop or plot is taxed separately from your salary or business income. It has its own slab table, and the tenant, if it's a company, bank, government office or other prescribed person, usually deducts the tax before paying you. That deduction happens under Section 155 of the Income Tax Ordinance.
The slabs for individuals and associations of persons are:
| Annual rent | Tax |
|---|---|
| Up to Rs 300,000 | Nil |
| Rs 300,001 – 600,000 | 5% of the amount above Rs 300,000 |
| Rs 600,001 – 2,000,000 | Rs 15,000 + 10% of the amount above Rs 600,000 |
| Above Rs 2,000,000 | Rs 155,000 + 25% of the amount above Rs 2,000,000 |
Companies that receive rent pay a flat 15% of the gross amount.
Tax on common monthly rents
| Monthly rent | Annual rent | Tax per year | Tax per month |
|---|---|---|---|
| Rs 25,000 | Rs 300,000 | Rs 0 | Rs 0 |
| Rs 50,000 | Rs 600,000 | Rs 15,000 | Rs 1,250 |
| Rs 100,000 | Rs 1,200,000 | Rs 75,000 | Rs 6,250 |
| Rs 150,000 | Rs 1,800,000 | Rs 135,000 | Rs 11,250 |
| Rs 250,000 | Rs 3,000,000 | Rs 405,000 | Rs 33,750 |
| Rs 500,000 | Rs 6,000,000 | Rs 1,155,000 | Rs 96,250 |
A worked example
Farah owns a small flat in Gulberg that she rents to a software house for Rs 150,000 a month. That's Rs 1,800,000 a year. Her tax is Rs 15,000 plus 10% of Rs 1,200,000, which comes to Rs 135,000. The software house deducts it from the rent each month, roughly Rs 11,250, and deposits it with FBR. Farah gets a certificate at year end, and the tax counts against her liability when she files.
Tenant deducts, or you pay yourself?
If your tenant is an individual who isn't required to withhold tax, nobody deducts anything. You still owe the tax. You declare the rent on your return and pay it then. Many landlords with family tenants forget this until an FBR notice reminds them.
Can I deduct expenses?
For individuals and AOPs, the rental slabs apply to gross rent. The old system of deducting repairs, insurance and similar costs no longer applies to them in the same way. Companies have their own rules. If you're unsure, ask a tax adviser, especially if you own several properties.
Non-filers pay more
If you're not on the Active Taxpayers List, withholding agents are required to deduct tax at higher rates, generally double. On a Rs 1.8 million rent, that's a big difference. Filing your return each year is the simplest way to stop it. Read more in our filer vs non-filer guide.
Advance rent and security deposits
Rent you receive in advance is taxed in the year it relates to, not necessarily the year you receive it. A refundable security deposit is not rent, but a non-adjustable advance can be treated as rental income spread over the lease. Keep your rental agreement handy; FBR may ask for it.
Joint owners are taxed on their own share. If you and your brother own a house equally and rent it for Rs 1,200,000 a year, each of you reports Rs 600,000, which sits in the lower slabs.
Commercial vs residential
The same slabs apply whether you rent out a home, a shop or an office. What usually differs is who the tenant is. Commercial tenants like banks, chains and companies are almost always required to withhold tax, while residential tenants are usually families who don't. That's why shop owners often see the tax deducted automatically while house owners have to pay it themselves when they file.
Related calculators
- Property purchase tax calculator, if you're buying a property to rent out.
- Electricity bill tax calculator, for tax on bills in your name.
- Filing guide, for reporting rent on IRIS.
Frequently asked questions
Is rent up to Rs 25,000 a month taxable?
No. Rs 25,000 a month is Rs 300,000 a year, which is the tax-free limit for individuals and AOPs.
Who deducts tax on rent?
Companies, banks, government bodies, non-profits and certain other prescribed persons must deduct tax under Section 155 when paying rent. Individual tenants usually don't.
Is rental income added to my salary?
No. For individuals, rental income is taxed separately under its own slabs, though you report both on the same return.
Does the property owner have to file a return?
Yes, if the rent or other income is above the taxable limit. Filing also keeps you on the Active Taxpayers List.
Rates: Income Tax Ordinance 2001 and its schedules as amended by the Finance Act 2026, plus FBR's withholding tax rate card for Tax Year 2027. Results are estimates. Check with FBR or a tax adviser before acting on them.