In short
- Rent is taxed separately from your salary or business income, at its own rates.
- Companies and many other tenants deduct tax from the rent and give you a certificate. You claim it in your return.
- Selling property means advance tax at the time of transfer and possibly capital gains tax.
Tax on rent
- For individuals, rent is taxed on the full amount received, without deducting repairs or other costs.
- A non-refundable advance from a tenant is also treated as rent, spread over several years.
- Every property you own must be listed in your wealth statement, rented or not.
Buying and selling property
- The seller pays advance tax of 2.75% of the sale value (section 236C).
- The buyer pays advance tax of 1.25% of the fair market value (section 236K).
- A gain on sale may also be taxed as a capital gain, depending on when the property was bought.
Example
Sara rents a flat to a company for Rs 100,000 a month
The company deducts tax from each payment and gives her a tax deduction certificate. In her return she shows the full Rs 1,200,000 of rent, and the tax already deducted is set against what she owes.
Common mistakes we fix
- Collecting rent in cash and not declaring it.
- Leaving an inherited or jointly owned property out of the wealth statement.
- Not collecting tax certificates from the tenant.
My property is in my wife's or father's name. Who pays tax on the rent?
Generally the legal owner who receives the rent. Joint owners each declare their own share. Ask us if your case is mixed.
I'm overseas. Do I still pay tax on rent from Pakistan?
Yes. Rent from property in Pakistan is taxed in Pakistan whether or not you live here. See our guide for overseas Pakistanis.
General guidance for Tax Year 2027, not advice on your specific case. Rules change with each Finance Act, so please speak to us before acting on it.