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28-Model Extension
Section 155 of the Income Tax Ordinance, 2001 mandates prescribed persons to deduct tax at source on rent of immovable property, including furniture and related services. Companies face flat rates, while individuals and AOPs follow a slab system. Rates double for non-filers, ensuring effective tax collection, promoting compliance, and transparent reporting of rental income.
Every prescribed person making a payment in full or part (including a payment by way of advance) to any person on account of rent of immovable property (including rent of furniture and fixtures, and amounts for services relating to such property) shall deduct tax from the gross amount of rent paid at the rate specified in DIVISION V OF PART III OF THE FIRST SCHEDULE
- the Federal Government;
- a Provincial Government;
- a Local Government;
- a company;
- a non-profit organization or a charitable institution;
- a diplomatic mission of a foreign state;
- a private educational institution, a boutique, a beauty parlour, a hospital, a clinic or a maternity home;
- individuals or association of persons paying gross rent of rupees one and a half million (1,500,000) and above in a year; or
- any other person notified by the Board for the purpose of this section.
WITHHOLDING TAX DEDUCTION / RATES | ||||||
|---|---|---|---|---|---|---|
SR | UNDER | PARTICULARS / DESCRIPTION | FILER | NON | TAX | APPLICABLE |
1 | 155 | Gross rental income or payment | 15% | 30% | ADJ | Company |
WITHHOLDING TAX DEDUCTION / RATES | ||||
|---|---|---|---|---|
SR | GROSS AMOUNT OF RENT | RATE OF TAX | TAX | APPLICABLE |
1 | Where the gross amount of rent does not exceed Rs. 300,000 | Not applicable (0%) | ADJ | IND / AOP |
2 | Where the gross amount of rent exceeds Rs. 300,000 but does not exceed Rs. 600,000 | 5% of the gross amount exceeding Rs. 300,000 | ||
3 | Where the gross amount of rent exceeds Rs. 600,000 but does not exceed Rs. 2,000,000 | Rs. 15,000 + 10% of the gross amount exceeding Rs. 600,000 | ||
4 | Where the gross amount of rent exceed Rs. 2,000,000 | Rs. 155,000 + 25% of the gross amount exceeding Rs. 2,000,000 | ||
The rate of tax prescribed under section 155 shall be increased by 100% (double) in the case of a non-filer. | ||||
Section 155 of the Income Tax Ordinance, 2001 governs the withholding of tax on rent paid for immovable property, including rent for furniture, fixtures, and related services. Only prescribed persons are responsible for deducting tax at source.
For companies, rent withholding is applied at a flat adjustable rate, while individuals and AOPs are subject to a slab-based structure based on the gross annual rent. Where rent does not exceed Rs. 300,000, no tax is deducted; higher rent brackets are charged progressively at 5%, 10%, and 25% as per the applicable thresholds.
Importantly, to encourage tax compliance, the withholding tax rates under section 155 are doubled for non-filers.
Overall, Section 155 ensures effective tax collection on rental income by placing the responsibility of deduction on prescribed persons and applying structured rates aligned with the taxpayer’s filer status.
