LAHORE: The Federal Board of Revenue (FBR) has announced updated withholding tax rates on income from rent of immovable property for the tax year 2024-25.
The FBR, in a recent update to its withholding tax card, provided detailed tax rates applicable under Section 155 of the Income Tax Ordinance, 2001.
The revised rates are designed to streamline tax collection on rental income, with different rates for individuals, Associations of Persons (AOP), and companies. The new structure aims to ensure that taxpayers contribute according to their rental income while encouraging compliance with tax regulations.
Withholding Tax Rates for Individuals and AOPs
According to the FBR, the tax rates for individuals and Associations of Persons (AOP) on rental income are as follows:
1. For gross rent not exceeding Rs 300,000: The tax rate is set at 0%, meaning no withholding tax will be applied.
2. For gross rent exceeding Rs 300,000 but not exceeding Rs 600,000: A tax rate of 5% will be applied to the amount exceeding Rs 300,000.
3. For gross rent exceeding Rs 600,000 but not exceeding Rs 2 million: A base tax of Rs 15,000 will be applied, plus 10% of the gross amount exceeding Rs 600,000.
4. For gross rent exceeding Rs 2 million: The tax will be Rs 155,000 plus 25% of the gross amount exceeding Rs 2 million.
These progressive tax rates ensure that higher rental incomes are taxed at a greater rate, aligning with the FBR’s efforts to bring more equity to the tax system.
Higher Rates for Non-Active Taxpayers
In an effort to push more individuals and entities to register on the Active Taxpayers List (ATL), the FBR has introduced a penalty in the form of higher withholding tax rates for those not listed on the ATL. Non-ATL individuals and AOPs will face 100% higher tax rates compared to those on the ATL. This measure is intended to enhance tax compliance and reduce tax evasion.
Withholding Tax Rates for Companies
The FBR has also outlined tax rates applicable to companies receiving income from rent of immovable property. Companies that are on the ATL will be subject to a 15% withholding tax on rental income. However, companies not on the ATL will face double the rate, with a 30% withholding tax on rental income.
This distinction emphasizes the government’s strategy of rewarding compliant taxpayers while imposing stricter measures on those who evade taxes.
The updated withholding tax rates reflect the FBR’s ongoing efforts to strengthen tax administration, broaden the tax base, and encourage timely tax compliance.
