As per Lawkidunya, 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.
Explanation.- ―gross amount of rent‖ includes the amount referred to in sub-section (1) or (3) of section 16, if any.
Types of Property Income
1. Rental Income: Income from renting out a property, including houses, apartments, commercial buildings, and other types of properties.
2. Capital Gains: Profit from the sale of a property, including land, buildings, and other types of properties.
3. Agricultural Income: Income from agricultural land, including rent, crop sharing, and other types of agricultural income.
Taxation of Property Income
1. Rental Income: Taxed at a flat rate of 5% to 20% of the gross rental income, depending on the type of property and the taxpayer’s status.
2. Capital Gains: Taxed at a rate of 5% to 20% of the gain, depending on the type of property and the holding period.
3. Agricultural Income: Exempt from tax, but may be subject to wealth tax.
Allowable Deductions
1. Municipal Taxes: Deductible from rental income.
2. Repairs and Maintenance: Deductible from rental income.
3. Interest on Mortgage: Deductible from rental income.
4. Depreciation: Deductible from rental income.
Tax Filing Requirements
1. Tax Return: Taxpayers must file a tax return (Form A) to report property income.
2. Statement of Assets and Liabilities: Taxpayers must file a statement of assets and liabilities (Form B) to report property assets.
3. Supporting Documents: Taxpayers must maintain supporting documents, such as rental agreements, receipts, and bank statements.
Penalties For Non-Compliance
1. Late Filing Fee: A penalty of Rs. 20,000 to Rs. 50,000 for late filing of tax return.
2. Default Surcharge: A penalty of up to 25% of the tax due for non-payment or underpayment of tax.
3. Prosecution: Taxpayers may be prosecuted for tax evasion or non-compliance with tax laws.
It’s essential to consult with a tax professional or the Federal Board of Revenue (FBR) to ensure compliance with the tax laws and regulations in Pakistan.