Circular No. 3 of 2007, Islamabad, September 29, 2007

CLARIFICATION REGARDING DEDUCTION OF INCOME TAX ON RENTAL INCOME/HIRING CLAIMS Government of Pakistan Central Board of Revenue (Revenue Division) ***** No.F.4(29)ITP/2002-S-155 Islamabad, September 29, 2007 Circular No. 3 of 2007 (Income Tax) Subject: CLARIFICATION REGARDING DEDUCTION OF INCOME TAX ON RENTAL INCOME/HIRING CLAIMS Circular No. 3 of 2007, Islamabad, September 29, 2007:- Certain queries have been received by the Board regarding charge'ability of tax in respect of rental income under section 15 and deduction of tax under section 155 of the Income Tax Ordinance, 2001. The same have been considered and are clarified as under:- ________________________________________________________________________ Issues Raised Board's Clarification ________________________________________________________________________ i. Whether amount upto Rs.150,000/ per annum is exempt. In the case of an individual or AOP, no tax is chargeable on rental receipts upto Rs.150,000/- provided the taxpayer does not derive taxable income under any other head of income.The term ?taxable income?has been defined in section 9 of the Income Tax Ordinance, 2001. ________________________________________________________________________ ii. What treatment is to be given to self hiring cases. Tax is to be deducted @ 5% as the taxpayer is receiving payment as owner of the property. ________________________________________________________________________ iii. Whether property income of Rs.150,000/ and Rs.150,000/- on account of pay and allowances (Total Rs.300,000/-) is exempt from tax deduction. Salary income of Rs.150,000/- is taxable, however, it is chargeable to tax at 0% rate as per Division I of Part I of the First Schedule to the Income Tax Ordinance, 2001. Since the taxpayer is deriving taxable income from salary, therefore, in the instant case rental income of Rs.150,000/- is chargeable to tax @ 5%. ________________________________________________________________________ iv. If the owner gives undertaking/ affidavit that he has no other source of income and rental income is his only source of income, should such certificate be accepted and no tax on income less then Rs.150,000/ be…