Understanding FBR Section 155 Withholding Tax on Rental Income in Pakistan
Owning rental property in Pakistan can provide a regular source of income. However, landlords, commercial property owners and property managers also need to understand their tax responsibilities.
One important provision of Pakistan's Income Tax Ordinance, 2001 is Section 155, which deals with withholding tax on rent received from immovable property.
Whether you own a residential house, apartment, office, shop or commercial plaza, understanding Section 155 can help you maintain accurate rental records, manage tax deductions and avoid unnecessary compliance problems.
In this guide, we explain FBR Section 155, who is responsible for deducting withholding tax, applicable rates for Tax Year 2027, and how landlords can organise their rental income records.
1. What Is FBR Section 155?
Section 155 of the Income Tax Ordinance, 2001 deals with withholding tax on rent of immovable property.
Under this provision, certain prescribed persons making rental payments must deduct tax from the gross rent paid to the property owner.
The provision covers payments relating to:
Residential houses and apartments.
Commercial shops and offices.
Plazas and commercial buildings.
Other immovable rental properties.
Rent relating to furniture and fixtures.
Certain services and amounts connected with rented property.
The withholding tax is deducted when the prescribed person makes a rental payment, including an advance rental payment.
Important: Section 155 withholding tax is not automatically the complete or final income tax liability of every landlord. Rental income is generally assessed under the head Income from Property, subject to the applicable provisions of the Income Tax Ordinance.
2. Who Is Required to Deduct Withholding Tax Under Section 155?
Not every tenant is automatically required to deduct withholding tax.
Section 155 identifies specific categories of persons known as prescribed persons.
These include:
Federal Government.
Provincial Government.
Local Government.
Companies.
Non-profit organisations and charitable institutions.
Diplomatic missions of foreign states.
Private educational institutions.
Boutiques and beauty parlours.
Hospitals, clinics and maternity homes.
Individuals or associations of persons paying gross rent of Rs. 1.5 million or more annually.
Other persons notified by FBR for this purpose.
For example, if a company rents an office from an individual landlord, the company generally falls within the prescribed-person category and must consider its Section 155 withholding obligations.
Similarly, an individual or association of persons paying annual gross rent of Rs. 1.5 million or more is included in the prescribed-person definition.
A normal individual tenant paying less than this annual threshold is not automatically required to deduct tax under Section 155 merely because they are renting a property.
3. Section 155 Withholding Tax Rates for Tax Year 2027
The applicable withholding tax rates depend on the type of property owner and the annual gross rental amount.
The following rates are based on FBR's Withholding Income Tax Rate Card for Tax Year 2027, updated up to 30 June 2026 under the Finance Act, 2026.
A. Individual and Association of Persons (AOP)
| Annual gross rental income | Withholding tax |
|---|---|
| Up to Rs. 300,000 | Nil |
| Rs. 300,001–600,000 | 5% of amount exceeding Rs. 300,000 |
| Rs. 600,001–2,000,000 | Rs. 15,000 + 10% above Rs. 600,000 |
| Above Rs. 2,000,000 | Rs. 155,000 + 25% above Rs. 2,000,000 |
B. Company-Owned Property
| Company status | Withholding tax rate |
|---|---|
| Active Taxpayer List (ATL) | 15% |
| Non-ATL | 30% |
These are withholding rates, not a substitute for calculating the owner's complete annual income tax liability.
4. Practical Examples of Section 155 Tax Calculation
Let's understand the calculation through some simple examples.
Example 1: Annual Rental Income of Rs. 500,000
The annual rent falls within the Rs. 300,001–600,000 bracket.
Calculation:
First Rs. 300,000: No tax.
Remaining Rs. 200,000: 5%.
Tax deduction: Rs. 10,000.
Example 2: Annual Rental Income of Rs. 1,200,000
The annual rent falls within the Rs. 600,001–2,000,000 bracket.
Calculation:
Initial tax: Rs. 15,000.
Remaining amount: Rs. 600,000.
Additional tax: Rs. 600,000 × 10% = Rs. 60,000.
Total withholding tax: Rs. 75,000.
Example 3: Annual Rental Income of Rs. 3,000,000
The annual rent exceeds Rs. 2 million.
Calculation:
Initial tax: Rs. 155,000.
Remaining amount: Rs. 1,000,000.
Additional tax: Rs. 1,000,000 × 25% = Rs. 250,000.
Total withholding tax: Rs. 405,000.
These examples illustrate the withholding calculation for an individual or AOP under the published Tax Year 2027 rate card. Actual tax treatment should be checked against the owner's circumstances and applicable law.
5. How Does Section 155 Work Between Landlord and Tenant?
The withholding process generally works as follows:
Step 1: Rental Agreement
The landlord and tenant agree on the monthly rent and sign a rental agreement.
Step 2: Identify the Withholding Agent
The tenant determines whether they fall within the prescribed-person definition under Section 155.
Step 3: Calculate Withholding Tax
If Section 155 applies, the withholding agent calculates the applicable tax on the gross rental amount.
Step 4: Deduct Tax From Rent
The tenant deducts the applicable tax before transferring the remaining rental payment to the landlord.
Step 5: Deposit Tax With FBR
The withholding agent deposits the deducted tax through the applicable FBR payment process.
Step 6: Maintain Tax Records
The landlord and withholding agent should retain payment details and relevant tax deduction evidence for their records.
6. Is Section 155 Tax the Final Tax on Rental Income?
This is an important question for property owners.
Generally, withholding tax deducted under Section 155 is treated as an advance tax credit rather than the final tax liability on rental income.
The landlord must consider rental income under the applicable income tax provisions when preparing their annual tax return.
Section 15 deals with income from property, while Section 15A provides for certain deductions in computing taxable income from property.
Depending on the landlord's circumstances, the annual tax calculation may differ from the amount already deducted at source.
Landlords should maintain their withholding certificates and payment evidence so that eligible tax credits can be properly considered in their tax returns.
7. What Records Should Landlords Maintain?
Proper recordkeeping is essential for landlords receiving rental income from multiple properties.
Consider maintaining the following information:
Property Records
Property address and identification.
Property ownership details.
House, apartment, shop or office number.
Monthly agreed rental amount.
Tenant Records
Tenant's full name.
CNIC or relevant identification details.
Contact information.
Rental agreement.
Tenancy commencement and expiry dates.
Rental Payment Records
Monthly rent received.
Payment date.
Outstanding rent.
Security deposit.
Advance rental payments.
Tax Records
Annual gross rental income.
Applicable withholding tax.
Tax deducted by tenants.
FBR payment or CPR details.
Withholding tax certificates.
Annual rental income summary.
Keeping these records organised makes it easier to prepare tax returns and respond to accounting or tax-related queries.
8. Common Mistakes Property Owners Should Avoid
Many landlords manage their properties informally and overlook important financial and tax records.
Here are some common mistakes:
1. Assuming Every Tenant Must Deduct Tax
Section 155 applies to prescribed persons. Not every individual tenant automatically has a withholding obligation.
2. Confusing Withholding Tax With Final Tax
Tax deducted under Section 155 should not automatically be treated as the landlord's complete tax liability.
3. Not Maintaining Annual Rental Records
Monthly rental payments should be recorded and summarised throughout the tax year.
4. Ignoring Tax Deduction Certificates
Landlords should obtain and retain evidence of tax deducted at source.
5. Mixing Personal and Rental Income Records
Keeping property-related financial transactions organised makes annual tax preparation easier.
9. How DigixoProperty Helps Landlords Manage Rental Records
Managing multiple rental properties, tenants, monthly payments and tax documentation can become complicated when everything is handled through paper files and spreadsheets.
DigixoProperty – Property & Rental Management Software helps landlords and property managers organise rental operations through one centralised platform.
With DigixoProperty, you can manage:
Multiple houses, flats and commercial shops.
Tenant profiles and CNIC records.
Rental agreements and lease documentation.
Monthly rent tracking and payment records.
Outstanding rental payments.
WhatsApp rent reminders and receipts.
Stamp paper lease PDF generation.
Property and tenant management.
FBR Section 155 annual tax reporting (CSV), available in the Pro Commercial package.
For commercial plaza owners and property management companies, centralised rental records can make it easier to monitor rental income and organise information required for accounting and tax preparation.
DigixoProperty helps simplify property administration so that landlords can spend less time managing paperwork and more time growing their rental portfolios.
10. Final Thoughts
Understanding FBR Section 155 is important for landlords, property investors and commercial property owners in Pakistan.
Knowing who is required to deduct withholding tax, understanding the applicable tax rates and maintaining proper rental records can help property owners manage their tax responsibilities more effectively.
Whether you own one rental house or manage hundreds of commercial units, organised financial records make property management easier.
Simplify your rental property management with DigixoProperty.
Manage tenants, rental agreements, payments and FBR Section 155 annual tax reporting through one digital platform.
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Disclaimer: This article is for general educational and informational purposes only. Tax rates and requirements may change through Finance Acts and other amendments. The official Income Tax Ordinance, 2001 and FBR notifications prevail over summaries or examples in this article. Consult a qualified tax professional for advice regarding your individual tax position.