TAXABLE INCOME=Total income – Deductible Allowances.

Income on which tax will be imposed.

TAX LIABILITY=Taxable Income * Rate of Tax

TOTAL INCOME= IP+ICG+IS+IB+IOS

IP = INCOME FROM PROPERTY.

ICG= INCOME FROM CAPITAL GAIN.
IS= INCOME FROM SALARY.
IB= INCOME FROM BUSINESS.
IOS=INCOME FROM OTHER SOURCES.

DEDUCTIBLE ALLOWANCES:-
 ZAKAT PAID UNDER ZAKAT AND USHR ORDINANCE 1980.
 CONTRIBUTION TO WWF.
 CONTRIBUTION TO WPPF.
 DEDUCTION UNDER SEC 61
 CONTRIBUTION TO PAKISTAN BAITULMAAL 1991.
 “INCOME FROM PROPERTY“
IP (INCOME FROM PROPERTY) = Amount chargeable of IP – Deductions Allowed of IP
 Amount chargeable are just like revenues.
 Deduction allowed are just like expense.

“The RENT received or receivable in the tax year shall be treated as income from
property OF OWNER for that tax year”

KEY WORDS: RENT, TENANT, TENANCY AGREEMENT, VACANT

AMOUNT CHARGEABLE INCLUDES:
 Rent (if the actual RENT received < FMR, then the ACTUAL RENT = FMR)
(whichever is higher).
 Signing amount( if any) non refundable
 Any obligation related with the property of owner, but paid by the tenant.
 Forfeited deposit (TOKEN MONEY)
 Security deposit.
i. Advance adjustable against rent (NON REFUNDABLE) (part & parcel
of rent ) (No treatment)
ii. Advance un-adjustable against rent. (Refundable), only applicable
for building (shop & house). No treatment in case of open plot.

FMR = FAIR MARKET RENT

ALV = ANNUAL LETTING VALUE
ARV = ANNUAL RENTAL VALUE

FORFEITED DEPOSIT: If the sale of building/land and the buyer breach the
contract, then the token money received initially, has been forfeited by the
owner.

ADVANCE (UNADJUSTABLE) (ONLY FOR BUILDING)

i. CASE ONE:- ADVANCE RECEIVED IN THE TAX YEAR.
TAXABILITY:- 1/10 or 10% (10 TAX YEARS) of advance will be taxable for current
tax year and 9 subsequent tax years.

ii. CASE TWO: ADVANCE REFUNDED IN THE TAX YEAR.

TAXABILITY:- No amount will be taxable in current and subsequent tax years.

iii. CASE THREE:- ADVANCE RECEIVED FROM NEW TENANT AND REFUNDED
DEPOSIT TO OLD TENANT IN THE SAME TAX YEAR.

TAXABILITY:- New Deposit *****

Less: The amount of old deposit that has already been taxed in the (*****)
Preceding No. of tax years
_______
*****/10years
________
TAXABLE AMOUNT *****
INCOME FROM PROPERTY:–
 IF OWNER IS THE INDIVIDUAL (OPTION IS AVAILABLE)whichever is feasible
(STR) SPECIAL TAX REGIME ON GROSS RENTAL INCOME
OR
(NTR) NORMAL TAX REGIME ON NET INCOME BASIS
 IF OWNER IS THE COMPANY (NTR-ITEM)-NORMAL TAX REGIME (29%)
DEDUCTIONS ALLOWED: EXPENSES
 Repair and maintenance allowance (ONLY FOR BUILDING)
(1/5 of Amount chargeable) 20% OF AMOUNT CHARGEABLE
(Actual expense are immaterial)
 Insurance expense related to property. (ONLY FOR BUILDING)
 Property tax. (including ground rent)
 Interest or markup on loan- utilized for the purpose of property.
 Any irrecoverable rent.
A. The tenancy agreement is bona fide.
B. All the legal proceedings have been taken.
C. Irrecoverable rent has already been included in the amount chargeable.
 Legal charges related with property to defend the title of property or any
suit connected with the property in the court.
 Other administrative or general expense related to property
RENT COLLECTION CHARGES
LEGAL CHARGES TO DRAFT THE TENANCY AGREEMENT
(Actual amount Or 4% of amount chargeable) whichever is lower.
Except:- Depreciation expense of building(property).