Tax on gross rental income on the section 155 slab.
Tax on rent
—
Net rent after tax
—
Effective rate
—
Rent has its own slab, separate from your salary
Rental income earned by an individual in Pakistan is taxed under its own progressive schedule, the section 155 rent slab, and it runs on gross rent rather than on the profit left after expenses. That last point trips people up constantly. The tax does not wait for you to subtract maintenance, agent fees, or repairs; it lands on the full rent you collect across the year. The structure is a familiar staircase: a tax-free first band, then rising percentages applied only to the rent that falls into each higher band. So your rent is sliced, and each slice is taxed at the rate for the step it sits on, not at one blanket rate across the whole amount.
Where the tenant comes in
For many rentals this tax is not something you hand over at year end. The tenant, particularly a company or a withholding agent, deducts it at source under section 155 and deposits it against your name before paying you the rent. That deduction is adjustable in your annual return, so it is a credit toward your final liability rather than an extra cost. The bands and the tax-free threshold this calculator applies are set in tax law and rewritten through the annual Finance Act, so treat the specific percentages as the figures the tool models and confirm the current section 155 rent slab with the FBR before you file.
A landlord collecting PKR 3,000,000 a year
Picture a landlord with PKR 3,000,000 of gross annual rent, enough to reach into the top band the calculator applies. The rent is split across the steps and each slice taxed at its own rate. The first PKR 300,000 is free, the next slice up to PKR 600,000 is taxed at the lowest rate, the large middle slice carries the next rate, and only the portion above PKR 2,000,000 hits the top rate.
| Slice of rent | Rate this tool applies | Tax on slice |
|---|
Notice the effective rate lands at 13.5%, well below the 25% top band, because most of the rent is taxed at the gentler lower steps. The chart shows the full rent split into the tax taken and the net you keep.
The deduction you cannot make, and one you might
The most expensive misunderstanding here is expecting to net off your costs. Because the slab works on gross rent, the repairs, the property manager, and the months a unit sat empty do not lower this particular figure. That said, the rent-slab route is not always your only option. Pakistan has at times allowed property income to be taxed differently for certain taxpayers, where rent is treated as part of normal income with some expense relief, instead of under the flat rent slab. Which treatment applies, and whether you can choose, depends on the year and your circumstances. This is exactly the point to ask a tax adviser or check the current FBR position, because picking the wrong basis can cost a high-rent landlord a meaningful sum.
Does rental income get added to my salary for tax?
Generally the individual rent slab treats property income on its own schedule rather than stacking it on top of salary, which is why this calculator works from rent alone. Your situation can differ, especially if property is your main business or you fall under a different basis of taxation, in which case rent can interact with your other income. If you have substantial salary and substantial rent, it is worth confirming with the FBR how the two are combined in your case.
What if the tenant did not deduct any tax?
You are still liable. The withholding by the tenant is a collection mechanism, not the limit of your obligation. If no tax was deducted, for instance where an individual tenant was not required to withhold, you must declare the rent and pay the tax through your annual return yourself. Keeping a clean record of rent received month by month makes that filing straightforward and protects you if the deduction history is ever questioned.