Professional Documents
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BASIS OF TAXATION
1. Income from property is taxable as a separate block of income on grossrentalreceipts.InFinanceAct2010wordssection155wereomitted fromsection169meaningbythatthissourceofincomehasbeenshifted backtonormaltaxregime.Consequentlyalltaxcreditsareallowablew.e.f. taxyear2011
BEFORE INSERTION THROUGH FINANCE ACT, 2010
The basis of taxation of Income from Property both i.e. (where withholding tax deducted or no withholding tax is deducted) was coveredunderFinalTaxRegime. 2. Incomefrompropertyistaxableonthebasisofgrossrentalreceiptsandno deductionofanyexpenditureisallowableagainstreceiptsasaSeparate BlockofIncome.Howeverafteromissionofsection155fromsection169, alltaxcreditsareadmissibleagainsttaxliability.
CHARGEABLE AMOUNT [SECTION 15 & 16]
1. Therentreceivedorreceivablebyapersonforataxyearischargeableto tax(includesanyforfeiteddeposit)inthatyearunderthehead Income fromProperty. 2. Accordinglytherentreceivedorreceivableforataxyearischargeableto taxwhethertherenthasbeenactuallyreceivedduringtheyearornot. 3. Incasetherentreceivedorreceivablebytheownerislessthanthefair marketrentofthelandorbuilding,theamountchargeabletotaxwillbe the fair market rent. The fair market rent is not defined in the Ordinance,itmeanstherentthepropertywouldordinarilyfetchintheopen market.[Sec.15(4)] Page1of7
SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY
1. Anyamountreceivedbywayofadvanceordepositorpugreebytheowner ofimmoveablepropertyfromatenant,whichisnotadjustableagainstthe rent payable by the tenant, shall, as provided in section 16(1) be chargeabletotaxinequalproportionintenyearsfromthetaxyearinwhich itwasreceived. 2. Incasethetenantvacatesthepremisesbeforetheexpiryof10years,no portionofamountshallbeallocatedtotheincomeoftheyearinwhichitis refunded and thereafter. If the property is let out to another tenant, the amountreceivedfromothertenantwhichisnotadjustableagainsttherent willbereducedbytheamountofpreviousamountchargedtotaxandthe balance shall be deemed to be income and subjected to tax in equal proportioninsubsequent10yearsasmentionedinpara1above.
EXCLUSIONS FROM RENT [SECTIONS 15(3) & (3A)]
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SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY
2. Similarly u/s 15(3A) any amount included in rent which relates to the provisionofamenities,utilitiesorotherservicesconnectedwiththerenting ofthebuildingshallbeexcludedfromrentalincomeandbechargeableto taxunderthehead IncomefromOtherSources insteadofIncome fromProperty.
EXEMPTIONS
1. Therentreceivedorreceivableshallnotbechargeabletotaxinrespectof ataxpayerwho i. Isanindividualorassociationofperson ii. Derives income chargeable to tax under this section not exceeding Rs.150,000/inataxyear;and iii. Doesnotderivetaxableincomeunderanyotherhead.
NOTE:AsperFBRclarificationvideCircularNo.3of2007dated29.9.2007
Undersection15(6)theincomefrompropertyisliabletotaxattherate specifiedinDivisionVIofPartIoftheFirstSchedule,whichareasunder:
INDIVIDUAL, ASSOCIATION OF PERSONS & COMPANIES
SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY
PARTICULARS INDIVIDUAL & AOP
NIL
COMPANIES
WHERETHEGROSSAMOUNTOF RENTDOESNOTEXCEEDRS. 150,000/ WHERETHEGROSSAMOUNTOF RENTEXCEEDSRS.150,000/ BUTDOESNOTEXCEEDRS. 400,000/ WHERETHEGROSSAMOUNTOF RENTDOESNOTEXCEEDRS. 400,000/
5%PERCENTOFTHE GROSSAMOUNT EXCEEDING RS.150,000/ 5%PERCENTOFTHE GROSSAMOUNTOFRENT RS.20,000/PLUS7.5%OF THEGROSSAMOUNT EXCEEDING RS.400,000/ RS.65,000/PLUS10%OF THEGROSSAMOUNT EXCEEDING RS.1,000,000/
WHERETHEGROSSAMOUNTOF RS.12,500/PLUS7.5% RENTEXCEEDSRS.400,000/ OFTHEGROSSAMOUNT BUTDOESNOTEXCEEDRS. EXCEEDINGRS.400,000/ 1,000,000/ RS.57,500/PLUS10%OF WHERETHEGROSSAMOUNTOF THEGROSSAMOUNT RENTEXCEEDSRS.1,000,000/ EXCEEDINGRS. 1,000,000/
1. Everyprescribedpersonmakingapaymentinfullorpart(includinga payment by way of advance) to any person on account of rent of immoveableproperty(includingrentoffurnitureandfixturesandamountof servicesrelatingtosuchproperty)shalldeducttaxfromthegrossamountof rentpaidattheratespecifiedinDivisionVofPartIIIoftheFirstSchedule. 2. i. ii. iii. iv. v. Inthissectionprescribedpersonmeans: TheFederalGovernment. AProvincialGovernment. ALocalAuthority. ACompany. ANonprofitOrganization. Page4of7
SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY
vi. ADiplomaticmissionofaforeignstate;or vii. Any other person notified by the Central Board of Revenue for the purposeofthissection. 3. Above stated persons shall be Withholding Agents for tax collection on paymentofRent. WITHHOLDING TAX RATE TheratesofwithholdingtaxspecifiedinDivisionVofPartIIIoftheFirst Scheduleare:
INDIVIDUAL, ASSOCIATION OF PERSONS & COMPANIES
COMPANIES
WHERETHEGROSSAMOUNTOF RENTDOESNOTEXCEEDRS. 150,000/ WHERETHEGROSSAMOUNTOF RENTEXCEEDSRS.150,000/ BUTDOESNOTEXCEEDRS. 400,000/ WHERETHEGROSSAMOUNTOF RENTDOESNOTEXCEEDRS. 400,000/
5%PERCENTOFTHE GROSSAMOUNT EXCEEDING RS.150,000/ 5%PERCENTOFTHE GROSSAMOUNTOFRENT RS.20,000/PLUS7.5%OF THEGROSSAMOUNT EXCEEDING RS.400,000/ RS.65,000/PLUS10%OF THEGROSSAMOUNT EXCEEDING RS.1,000,000/
WHERETHEGROSSAMOUNTOF RS.12,500/PLUS7.5% RENTEXCEEDSRS.400,000/ OFTHEGROSSAMOUNT BUTDOESNOTEXCEEDRS. EXCEEDINGRS.400,000/ 1,000,000/ RS.57,500/PLUS10%OF WHERETHEGROSSAMOUNTOF THEGROSSAMOUNT RENTEXCEEDSRS.1,000,000/ EXCEEDINGRS. 1,000,000/
STATEMENTS TO BE FIELD
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SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY
1. The Prescribed person, who has deducted tax from the income from property,shallfurnishamonthlyandannualprescribedstatementwithin15 daysofthecloseoftheeachmonthandwithin2monthsofendofthe financialyearrespectivelywiththeCommissionerofIncometaxconcerned. 2. In case of corporate withholding agents efiling of monthly and annual statementsofdeductionoftaxisobligatory.
EXEMPTION FROM WITHHOLDING TAX
The following clauses of The Second Schedule provide exemption from deductionofwithholdingtaxfromrent:
CLAUSE (16) OF PART I
InstitutionsoftheAgaKhanDevelopmentNetwork(Pakistan)listedin Schedule 1 of the Accord and Protocol dated November 13, 1994, executedbetweentheGovernmentoftheIslamicRepublicofPakistan andAgaKhanDevelopmentNetwork.
CLAUSE (47) OF PART I
Onincomefrompropertynoadvancetaxpayableundersection147(1)(ba) oftheIncomeTaxOrdinance.
REFUND/ADJUSTMENT
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SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY
1. Incaseofjointlyownedpropertyincomefrompropertyisnotassessedas AOP. 2. Wherethepropertyisownedbytwoormorepersonsandtheyhavedefinite and ascertainable share in such property, each person is required to declarehisrespectiveshareofincomefrompropertyinhistaxableincome fortheyear.
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