Chapter 6

INCOME FROM PROPERTY

Sajjad Ahmed Malik

Faculty Member: RISE Premier School of Accountancy
Chapter 6 INCOME FROM PROPERTY

CHAPTER 6
INCOME FROM PROPERTY
Income from Property [Sec. 15]
(2) “Rent” means:
• any amount received or receivable by the owner of land or a building as
consideration for the use or occupation of, the land or building, and includes
• any forfeited deposit paid under a contract for the sale of land or a building.
LAND OR BUILDING includes:
(i)Open plot of land rented out (ii)Land rented along with building

(1) The rent received or receivable by a person for a tax year, shall be chargeable in that
year under the head “Income from Property”. but rent exempt from tax shall not be
included in it,

(4) where the rent received or receivable by a person is less than the fair market rent for
the property, the fair market rent shall be treated as rent.
Example
Babar Azam is a friend of Hassan Ali. Hassan Ali lets out a house to Babar at a
subsidized rent per month of Rs. 80,000. Rent prevailing in the market for the house of
similar size is Rs. 90,000 per month.
For the purpose of rental income under income from property, Rs, 90,000 per month
(90,000*12=1,080,000 per year) shall be taken

(5) Sub-section (4) shall not apply where the fair market rent is included in the income of
the lessee (employee) chargeable to tax under the head “Salary”. (it will be discussed
in chapter 5)

(3) Any rent received or receivable by a person against lease of a building together with
plant and machinery shall be chargeable under the head “Income from Other Sources”.

(3A) Where rent includes an amount received or receivable for the provision of amenities,
utilities or any other service connected with the renting of the building, it shall be
chargeable under the head “Income from Other Sources”.
Exercise from ICAP Book :
In respect of each of the independent situations mentioned below, Calculate the amount
which will be treated as rent chargeable to tax under the head “Income from Property” for
the tax year 2026.
i. Mr. Bilal received rent of Rs. 50,000 per month during the tax year 2026 when the
fair market rent of the property was Rs. 60,000 per month.
ii. 0n August 2025 Mr. Islam received Rs. 345,000 as rent for leasing out factory,
land, building and machinery
iii. On 1 July 2025 Mr. Hamza received two years advance rent of Rs. 1,500,000
iv. Mr. Usman owns 75 acres of agriculture land in Mirpur. He did not cultivate the
land himself and during the tax year 2026 received annual rent of Rs. 2,500,000
from the tenant cultivating the land.

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Answer:
i. Where rent received or receivable is less than fair market rent for the property, the
person shall be treated as having received the fair market rent (FMR) for the period
the property is let on rent in the tax year. Therefore, income from property will be (Rs.
60,000 x 12 months)
ii. It will be chargeable to tax under the head “income from other source”
iii. Rent relating to a tax year, whether received or receivable, is chargeable to tax in that
tax year. Therefore, rent received in advance amounting to Rs. 750,000 (Rs.
1,500,000/2) will be charged to tax in the tax year (TY 2026) to which it relates.
iv. Land is used for agriculture purpose. Any rent received by the owner of such land is
treated as agriculture income and exempt from tax. To claim the exemption, it is not
essential that the land should be used for agriculture purpose by the owner himself

Example-1
Mr. Zahid rented out his own house to Mr. Rasheed against a rent of Rs.
55,000/month from which Rs. 5,000/month is charged against rendering of utility &
sweeper services. The actual expenditures incurred by Mr. A are:
Utility bills 1,800/m
Sweeper wages 1,000/m
His Income from business in current year is Rs. 900,000.
Calculate his taxable Income?

Solution
- Income from business 900,000
- Income from other source (5,000 – 1,800 – 1,000) x 12 26,400
- Income from property (W-1) 480,000
Taxable income – taxable under NTR 1,406,400

(W-1) Income from property

Gross Rent (55000-5,000 x 12) 600,000
Less: Admissible deductions
Repair allowance (600,000 x 1/5) (120,000)
Rent chargeable to tax 480,000
Example-2
Mr. A has two houses. House # 1 is given on rent to an individual and House # 2 is given on
rent to a company.
House Rent/month of Amount Actual Exp. of
house charged/month for utility/month
utilities
House # 1 40,000 15,000 10,000
House # 2 70,000 18,000 3,000
Mr. A also earned income from business of Rs. 700,000.
Required: what is taxable income of Mr. A.
Answer
- Income from business 700,000
- Income from other source
- House # 1 (15,000 – 10,000) x 12 60,000

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- House # 2 (18,000 – 3,000) x 12 180,000

- Income from property (W-1) 1,056,000
Taxable income – taxable under NTR 1,996,000

(W-1) Income From Property

House # 1 (40,000 x 12) 480,000
House # 2 (70,000 x 12) 840,000
1,320,000
Less: Admissible deductions
Repair allowance (1,320,000 x 1/5) (264,000)
Rent chargeable to tax 1,056,000

Deductions in computing income chargeable under the head income from property-15A
(1) Following deductions shall be allowed under the head “Income from Property”:
a. In respect of repairs to a building, an allowance equal to one-fifth of the rent
chargeable to tax;

• Repair allowance will not be allowed in case where only open plot is given on rent
and will also not be allowed in case where forfeited deposit is received in case of
open plot/land.
• Repair allowance will be allowed in case where forfeited deposit is received in case of
contract for sale of house/building.
b. Insurance premium paid (or payable) in the year to insure the building;
c. local rate, tax, charge or cess paid (or payable) on property or the rent from the
property to any local authority or government in the year (excluding income tax);
d. Ground rent paid (or payable) for the property;
e. Any profit paid (or payable) on any money borrowed to acquire, construct,
renovate, extend or reconstruct the property;
f. If the property is acquired, constructed, renovated, extended, or reconstructed with
capital contributed by the House Building Finance Corporation or a scheduled
bank, the share in rent and share towards appreciation in the value of property;
g. Where the property is mortgaged (or other capital charge), the profit or interest
paid;
h. Any expenditure paid (or payable) wholly and exclusively for deriving rent
including administration and collection charges up to lower of;
i. actual expense or
ii. 4% of rent chargeable to tax
i. Legal charges paid (or payable) to defend the title of the property or any suit
connected with the property in court; and
j. where there are reasonable grounds to believe that unpaid rent is irrecoverable, an
allowance equal to the unpaid rent if:
(i)
➢ tenancy was bona fide,
➢ the defaulting tenant has vacated the property or steps have been taken
to compel the tenant to vacate the property and
➢ the defaulting tenant is not in occupation of any other property of the

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person;
(ii) owner has initiated legal proceedings or he believe that legal proceedings
would be useless; and
(iii) Unpaid rent has previously been included under the head “Income from
Property” and tax has been paid on it.

(2) Where any unpaid rent allowed as a deduction is wholly or partly recovered, the
amount recovered shall be chargeable in the tax year of receipt.
(3) Where a deduction is allowed to a person for any expenditure in deriving “Income
from Property” and the person has not paid the related liability within 3 years of
the end of the tax year in which the deduction was allowed, the unpaid liability
shall be chargeable under the head “Income from Property” in the first tax year
following the end of the three years.

(4) Where an unpaid liability is taken to income as above and the person
subsequently pays the liability, the person shall be allowed a deduction for the
amount paid in the year of payment.

(5) Any expenditure allowed as a deduction under this head shall not be allowed under
any other head.

(6) The deductions which are not allowed under the head income from business (u/s
21) will also not be allowed under the head Income from property.

N-1:
Rents specifically excluded from “Income from property”
The following rents are specifically excluded from Income from property and would be
taxable under the head Income from other sources:
1. Rent against lease of a building together with plant and machinery.
2. Rent for provision of amenities, utilities or any other service connected with the
renting of the building.
3. Rent from sub-lease of land or a building

Income of joint owners (Section 66)

Multiple ownership with shares individually ascertainable:
• Where any property chargeable under Income from property (section 15) is owned by
two or more persons and their respective shares in that property are definite
and ascertainable, net rental income will be proportionately allocated to each
owner.
• Each owner will pay tax on such income as per their applicable rates.

Multiple ownership with shares not individually ascertainable:

• Where any property chargeable under Income from property (section 15) is owned by
two or more persons and their respective shares in that property are not definite
and ascertainable, the property will be considered as being jointly owned by an
association of persons (AOP) and taxable income and tax payable thereon will be
computed as per the principles of taxation for AOP. (Chapter 12)
• Note: Same concept will applicable in all other heads except income from business.

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Note: If AOP is earning both income from business and income from property, then
income from property will be taxable in the hands of AOP and not the members.

Non-adjustable amounts received in relation to buildings [Sec. 16]

(1) Where the owner of a building receives from a tenant an amount which is not
adjustable against the rent, it shall be chargeable under the head “Income from
Property” in the tax year in which it was received and the following 9 tax years in
equal proportion.

(2) Where an amount which is not adjustable against the rent is refunded by the owner to
the tenant on termination of the tenancy before the expiry of 10 years, no portion of
the amount shall be allocated to the tax year in which it is refunded or to any
subsequent tax year.

(3) Where the owner has refunded non-adjustable amount to the tenant, on termination of
tenancy, and the owner lets out the building to succeeding tenant then:
new advance less such portion of the earlier amount that was charged to tax,
shall be chargeable under the head “Income from Property” in the tax year in which it
was received and the following 9 tax years in equal proportion.
Note: Non-adjustable advance in case of open plot of land (given on rent) is not taxable
under the law.
Note: If the advance is adjustable against rent it will be ignored in the question.

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ICAP PAST PAPER QUESTIONS

Question-1
What is chargeable to tax under the head ‘income from property’? (1)
(Q.3(a)September 2002)
Question-2
Describe the term ‘rent’ in the context of income from property. (2)
(Q.1(a)September 2006)
Question-3
Discuss the provisions of the Income Tax Ordinance, 2001 regarding non-adjustable amount received from a tenant
by the owner of a building. (5)
(Q.4 (b) March 2009)
Question-4
(i) Explain the term 'Rent’ in context of ‘Income from property’. (02)
(ii) Specify the head of income under which the following amounts would be chargeable to tax:
▪ rent from sub lease of a building.
▪ amount included in rent for the provision of amenities, utilities and any other service connected with
renting of the building. (02)
(Q.4(a) March 2015)
Question-5
Bashir and Jameel jointly own a house in Karachi. Bashir has 75% share in the house. On 1 September 20X3,
the house was let out at an annual rental value of Rs. 6,500,000. This amount includes Rs. 186,000 per month
for utilities, cleaning and security.

During the tax year 20X4, the owners incurred the following expenditures in relation to the house:

Rupees
Utilities, cleaning and security 650,000
Repair and maintenance 810,000
Insurance premium 240,000
Collection charges 25,400

Bashir and Jameel have no other source of income. All the above expenses were incurred by them jointly.
Required:
Calculate tax liability of Bashir and Jameel for the tax year 20X4. (10)
(Q.4 March 2014)
Question-6
ABC Associates owns a building which is on rent. The following information is available:
- Rent received from tenants 2,300,000
- Depreciation on building under the Third Schedule to the Ordinance 400,000
- Property Tax 100,000
- Municipal/local government taxes (agreements with tenants provide that tenant should pay
the municipal taxes) 100,000

Rent received includes Rs.600,000 for three years commencing from July 01 of the current year. ABC Associates
follow accrual basis of accounting and its income year is July-June 20X8.
Required: Compute the income from property of ABC Associates. (Q.4 September 2002)
Question-7
Mr. Sohail, a resident individual, owns a building in Clifton area of Karachi. On 1.10.2021 he rented out the
building to Mr. Baqir at an annual rent of Rs. 1,200,000. This amount include Rs. 15,000 per month for arranging
two security guards for the building. Following expenses were incurred by Mr. Sohail on the building during the tax
year 2022:
Rs.
Repairs and renovation 35,000
Property tax 20,000
Insurance premium 10,000
Rent collection charges 3,000
Mr. Sohail also paid a salary of Rs.4,000 per month to each of the two security guards at building.
Required: Under the provision of Income Tax Ordinance, 2001 calculate the tax liability of Mr. Sohail under the
appropriate heads of income for the tax year 2022. (06)

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(Q.4(a) December 2012)

Question-8
On 1.7.20X4, Fahim agreed to rent out a house to Mirza at a monthly rent of Rs.180,000 with effect from 1.8.20X4
and received one year's rent in advance. He also received Rs.800,000 as a security deposit which was partly used to
repay the security deposit of Rs.400,000 received from the previous tenant In July 20X0 and partly used for
renovation of the house.

Fahim also Incurred the following expenses In respect of the above house:
a. property tax of Rs. 15,000.
b. payment of interest Rs.200,000 to his friend against amount borrowed for renovation of the house.
c. Insurance premium of Rs. 110,000.
d. Rs.5,000 per month for collection of rent.

Required: Under the provisions of the Income Tax Ordinance, 2001 compute the property income of Fahim for tax
year 20X5 (07)
(Q.4(b) March 2015)

Question-9
Mr. Amir-ud-din has recently constructed an office complex for the purposes of letting out. As per terms and
conditions, Mr. Amir-ud-din is also entitled to signing amount, which is non- refundable.
For the tax year 20X8 following information has been provided to you for the computation of his income from
property:

Rent for the year already received 1,150,000

Rent for the year though due but irrecoverable 50,000
Signing amount (non-adjustable, non-refundable) 100,000
Fire tax paid to the local authority 20,000
Lawyer's fee for suit to recover rent 50,000
Salary of the caretaker who collects monthly rent 46,000
Insurance premium being 1% of market value of the property 200,000
Repair maintenance expenditure 50,000
Calculate his income from property for TY 20X8. (10)
(Q.5 March 2003)
Question-10

On 1 July 20X8, Zahid rented out his properties as follows:

(i) An apartment was rented to Abdul Qadir at a monthly rent of Rs. 40,000. Zahid received a non-adjustable
security deposit of Rs. 300,000 which was partly used to repay the non-adjustable security deposit
amounting to Rs. 175,000 received from the previous tenant in July 20X3. He also spent Rs.20,000 on
repairs of the apartment in February 20X9.
(ii) A bungalow was rented to a bank. Zahid and his younger brother are joint owners of the bungalow in the
ratio of 60:40 respectively. The annual rent agreed with the bank was Rs. 6,000,000 which is inclusive of
Rs. 100,000 per month for utilities, cleaning and security. Zahid paid Rs. 35,000 per month for providing
these services.
Required:
Under the provisions of Income Tax Ordinance, 2001 compute total and taxable income of Zahid for the tax year
20X9 under appropriate heads of income. (07)
(Q.3 (c) March 2019)
Question-11
Yaqoot and Loha are joint owners (co-owners) of a bungalow which has been rented out for Rs. 70,000 per month.
Required:
Discuss the taxability of Yaqoot and Loha in respect of above income, in the light of Income Tax Ordinance, 2001.
(3)
(Q.4 (b) March 2012)
Question-12
Explain the term ‘Rent’ with relation to ‘Income from property’. (02)
(Q.2 (a) September 2019)
Question-13
Farhan and Imran jointly own a building in Quetta. The building has been rented out to a company. Discuss the tax

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treatment of income from such property. (02)

(Q.3 (e) September 2019)
Question-14
On 1 July 2021 Farrukh borrowed Rs.8,000,000 from Star Bank Limited and acquired a plot of land in hub industrial
zone of Rs. 6,500,000. He invested rest of the loan in a business venture with his friend. The above loan carries
mark up at rate of 12% per annum and is repayable in eight equal quarterly installments starting from, 01 July 2022.
On 01 August 2021 Farrukh decided to sell plot of land to Zulfiqar Motors for Rs. 10,000,000 and receive deposit of
Rs. 500,000 from them. On 15 August 2021 Farrukh forfeited the deposit on refusal of Zulfiqar Motors to purchase
plot of land.
On 01 September 2021 Farrukh let out the plot of land to his friend Atif at a monthly rent of Rs. 150,000. He
received un-adjustable deposit of Rs. 200,000 from Atif and paid 80,000 for levelling the ground, Rs. 62,000 as
insurance premium against risk of damage or destruction by water logging and Rs. 140,000 against rent collection
charges. Farrukh has paid Rs. 25,000 to a firm of valuer, which determined the annual rental value of plot of land at
Rs. 2,160,000.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute under the relevant
head of income, taxable income of Farrukh for tax year 2022. (8)
(Q.4 September 2016)

Question-15
(a) Farheen is a resident filer and has provided following information pertaining to tax year 2020:
(i) She owns a bungalow situated in Multan which was given on rent to Abbas under a rental
agreement of four years which expired on 31 March 2020. Details of payments received as per
the rent agreement are given below.
Rent Rs. 175,000 per month
Security guards’ salaries Rs. 50,000 per month
Non-adjustable security deposit Rs. 2,500,000
On expiry of the rental agreement, Farheen refunded the security deposit to Abbas and rented out
the bungalow to a new tenant Zafar on the same terms and conditions.
Farheen pays Rs. 40,000 per month to a security services company which provides security guards
at the bungalow.
(ii) She owns a residential plot in Karachi. On 1 March 2020, she decided to sell the plot to Mehreen
for Rs. 2,200,000 and received a deposit of Rs. 176,000. On 1 June 2020, she forfeited the deposit
on refusal of Mehreen to purchase the plot.
(iii) On 1 December 2017, she had acquired a furnished office on monthly rent of Rs. 5,000 for her
own use and had paid a non-refundable amount of Rs. 2,000,000 to the previous tenant for
vacating the office. During the year, she received an offer of Rs. 2,400,000 from Shehroz to vacate
this office which she accepted and received the amount on 1 March 2020.
(iv) On 1 October 2019, she inherited a factory with plant and machinery from her father and let it out
on 1 December 2019 at a monthly rent of Rs. 500,000.
(v) On 15 November 2019, she received income tax refund of Rs. 180,000 related to tax year 2017.
This amount included Rs. 30,000 being additional payment on delayed refund.
Required: Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute the total
income of Farheen under appropriate heads of income for the tax year 2020. (07)

Question-16

Kashif is a resident filer who owns a single-storey bungalow in Karachi, including a basement. He solely uses the
basement portion of the bungalow which constitutes 20% of the total bungalow area, for storing his personal
belongings.
On 1 October 2019, he rented his bungalow, excluding the basement portion, to Ahmed under a three-year rental
agreement. Other details of the rental agreement are given below:

In addition to the above, Kashif also provides Ahmed with backup electricity from a generator during load shedding

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at a fixed monthly charge of Rs. 50,000. The electricity connection of the basement is separate from the rest of the
bungalow.
On 30 September 2022, the rental agreement concluded, and Kashif agreed to sell the entire bungalow to
Ahmed. The non-adjustable security deposit was retained as a down payment for the purchase.
On 25 October 2022, Ahmed backed out of the deal and declined to purchase the bungalow. As per the
agreement, Kashif forfeited the non-adjustable security deposit.
On 1 November 2022, Kashif rented the bungalow to a new tenant, Rashid, under a rental agreement with
the same terms as above.
During the year, Kashif paid salary of Rs. 360,000 to the security guard of the bungalow and incurred Rs. 450,000
for running the electricity generator.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made thereunder, compute the total income of
Kashif under appropriate heads of income for the tax year 2023. (08)

ICAP PAST PAPER SOLUTIONS

Answer-1
Followings are chargeable to tax under the head income from property:
1. Any amount received or receivable by the owner of land or a building as consideration for the use or
occupation of, or the right to use or occupy, the land or building,[S.15(2)]
2. Any forfeited deposit paid under a contract for the sale of land or a building. [S.15(2)]
3. Where the owner of a building receives from a tenant an amount which is not adjustable against the rent, the
earned amount shall be treated as rent chargeable to tax under the head “Income from Property” in the tax
year in which it was received and the following nine tax years in equal proportion.[S.16(1)]
Answer-2
“Rent” means “any amount received or receivable by the owner of land or a building as consideration for the use or
occupation of, or the right to use or occupy, the land or building, and includes any forfeited deposit paid under a
contract for the sale of land or a building.” [S.15(2)]
Answer-3
Section 16
Answer-4
i. ‘Rent’ means any amount received or receivable by the owner of land or a building as consideration for the use
or occupation of, or the right to use or occupy, the land or building, and includes any forfeited deposit paid
under a contract for the sale of land or a building. Where the owner of the building receives from a tenant an
amount which is not adjustable against the rent payable by the tenant, the amount shall be treated as rent.
ii. The income given in the question would be chargeable as follows:
▪ Rent from sub lease of a building shall be chargeable under the head “Income from Other Source”
▪ amount included in rent for the provision of amenities, utilities and any other service connected with
renting of the building shall also be chargeable under the head “Income from Other Source”
Answer-5
Income of Bashir
Income from Other Source [S.15(3A)] ((W-2) 1,210,000 x 75%) 907,500
Income from property (W-1) 1,934,950
Taxable income – taxable under NTR 2,842,450
Tax Payable to Govt. (Table 1) (170,000+ 1,242,450*30%) 542,735
Income of Jameel
Income from Other Source [S.15(3A)] ((W-2) 1,210,000 x 25%) 302,500
Income from property 644,984
Taxable income – taxable under NTR 947,484
Tax Payable to Govt. (Table 1) (15%*347,484) 52,123

(W-1) Income from property

Annual gross receipt 6,500,000
Less: Income chargeable under the head Income from other source (186,000 x 12) (2,232,000)
4,268,000

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Less: Receipt relating to next year ( 4,268,000 x 2/12) (711,333)

Gross rent chargeable to tax [S.15(1)] 3,556,667
Less: Admissible deductions
Repair allowance (3,556,667 x 1/5) (711,333)
Insurance premium (240,000)
Collection charges lower of:
- Actual charges 25,400
- 4% of chargeable rent (4% x 3,556,667) 142,267 (25,400)
Rent chargeable to tax (A) 2,579,934

Share of Bashir (2,579,934 (A) x 75%) (B) 1,934,950

Share of Jameel (2,579,934 (A) x 25%) (C) 644,984

(W-2) Income from other source

Rent charged for utilities, cleaning and security (186,000 x 10) 1,860,000
Less: Utilities, cleaning and security expense (650,000)
1,210,000

Answer-6

Income from Property (W-1) 1,400,000

Taxable income 1,400,000

(W-1) Income from property

Rent Received [S.15(1)] 2,300,000
Add: Municipal taxes paid by tenant [S. 69] 100,000
2,400,000
Less: Amount relating to next years (600,000/3 x 2) (400,000)
Gross rent chargeable to tax [S.15(1)] 2,000,000
Less: Admissible deductions
Repair allowance (2,000,000 x 1/5) (400,000)
Property tax (100,000)
Municipal/local government taxes (100,000)
1,400,000
Answer-7
Mr. Sohail
Taxable Income and tax thereon
For TY 2022
Income from Other source [S.15(3A)]
Amounting relating to security guard (15,000 x 9) 135,000
Less: Amount paid to security guard (4,000 x 2 x 9) (72,000) 63,000
Income from property (W-1) 579,000
Taxable income – taxable under NTR 642,000
Tax Payable to Govt. (Table 1) (42,000*15%) 6,300

(W-1) Income from property

Annual gross receipt 1,200,000
Less: Income chargeable under the head Income from other source (15,000 x 12) (180,000)
1,020,000
Less: Receipt relating to next year ( 1,020,000 x 3/12) (255,000)
Gross rent chargeable to tax [S.15(1)] 765,000
Less: Admissible deductions
Repair allowance (765,000 x 1/5) (153,000)
Property tax (20,000)
Insurance premium (10,000)
Collection charges lower of:
- Actual charges 3,000

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- 4% of chargeable rent (4% x 765,000) 30,600 (3,000)

Rent chargeable to tax 579,000
Answer-8
Mr. Fahim
Taxable Income and tax thereon
For TY 20X5
Income from Property (W-1) 1,255,200
Taxable income 1,255,200

(W-1) Income from Property

Chargeable rent [S.15(1)] (180,000 x 11) 1,980,000
Non-adjustable amount received in TY 20X5 800,000
Non-adjustable charged to tax: [S.16(3)]
TY 20X1 (400,000/10) (40,000)
TY 20X2 (400,000/10) (40,000)
TY 20X3 (400,000/10) (40,000)
TY 20X4 (400,000/10) (40,000)
(160,000)
640,000
Income of 20X5 (640,000/10) 64,000
Gross rent chargeable to tax [S.15(1)] 2,044,000
Less: Admissible deductions
Repair allowance (2,044,000 x 1/5) (408,800)
Property tax (15,000)
Profit paid on loan for renovation of house (200,000)
Insurance premium (110,000)
Collection charges lower of:
- Actual charges (5,000 x 11) 55,000
- 4% of chargeable rent (4% x 2,044,000) 81,760 (55,000)
1,255,200

Answer-9
Income from Property (W-1) 602,000
Taxable income 602,000

(W-1) Income from property Rs.

Annual rent received [S.15(1)] 1,150,000
Irrecoverable rent for the year 50,000
Non-adjustable amount (100,000/10) [S.16(1)] 10,000
1,210,000
Less: Admissible deductions
Repair allowance (1/5 x 1,210,000) (242,000)
Fire tax paid to local authority [S.15A(1)(c)] (20,000)
Lawyer’s fee for suit to recover rent [S.15A(1)(i)] (50,000)
Collection charges and other admin (Lower of:)
- Actual 46,000
- 4 % of 1,210,000 48,400 (46,000)
Insurance premium [S.15A(1)(b)] (200,000)
Bad debt (50,000)
602,000

Answer-10

Zahid
Computation of Taxable income and Tax thereon
For the year 20X9
Rupees
Income from Property (W-1) 2,705,000
Income from other sources
- Amount charged for providing amenities, utilities etc. [(100,000 -35,000) x 12] x 60% 468,000

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Chapter 6 INCOME FROM PROPERTY

Taxable income 3,173,000

(W-1) Income from Property

Rent from apartment (W-2) 401,000
Rent from banglow (W-3) (3,840,000 x 60%) 2,304,000
Income from Property 2,705,000

(W-2) Rent from apartment

Monthly rent 480,000
Non-adjustable Rent 300,000
Less: Already taxed (In TY 20X4 - TY 20X8) (175,000/10) x 5 years (87,500)
212,500/10 21,250
501,250
Less: Admissible deductions
Repair allowance (501,250 x 1/5) (100,250)
401,000

(W-3) Rent from banglow

Annual rent [6,000,000 - (100,000 x 12)] 4,800,000
Less: Admissible deductions
Repair allowance (4,800,000 x 1/5) (960,000)
3,840,000

Answer-11
Where any property is owned by two or more persons and their respective shares are definite and ascertainable –
(a) the persons shall not be assessed as an AOP in respect of the property; and
(b) The share of each person in the income from the property for a tax year shall be taxable in their own hands
respectively and not as AOP. [S.66]
Therefore, Yaqoot and Loha will pay tax separately on the income earned by them.
However, if the shares are not definite and ascertainable, then they will be assessed as an AOP in respect of income.
Answer-12
Same as Answer-2.

Answer-13
Where any property is owned by two or more persons and their respective shares are definite and ascertainable –
(a) the persons shall not be assessed as an AOP in respect of the property; and
(b) The share of each person in the income from the property for a tax year shall be taxable in their own hands
respectively and not as AOP. [S.66]
However, if the shares of Imran and Farhan are not definite and ascertainable, then they will be assessed as an AOP
in respect of income from building in Quetta.
Answer-14

Mr Farrukh
Taxable Income
Tax year 2022

Income from Property (W-1) 1,558,000

Taxable income 1,558,000
(W-1) Income from Property
Forfeited deposit [S.15(2)] 500,000
Rental Income from land [S.15(2)] 1,800,000
Higher of
➢ Actual rent or (150,000 x 10) = 1,500,000
➢ Fair market rent (2,160,000/12 x 10) = 1,800,000
Non-adjustable amount of 200,000 (not taxable in case of land given on rent) -
Gross 2,300,000
Less: Admissible deductions
Repair allowance (not allowed for land given on rent) -
Ground leveling charges -
Insurance Premium (Only allowed for building) -
Collection charges and other admin (Lower of:)

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Chapter 6 INCOME FROM PROPERTY

- Actual 140,000
- 4 % of 2,300,000 92,000 (92,000)
Paid to professional valuer -
Mark up on loan (6,500,000 x12% x10/12) (650,000)
1,558,000

Answer-15

Farheen
Computation of Income
For TY 2020
Rupees
Income from property (W-1) 1,976,000
Income from other sources (W-3) 3,690,000
Total income 5,666,000

(W-1) Income from property

Rent from Bungalow - Abbas [175,000 x 9] 1,575,000
Rent from Bungalow – Zafar [175,000 x 3] 525,000
Non-adjustable security deposit – Zafar (W-2) 150,000
2,250,000
Forfeiture of deposit for sale of plot 176,000
Gross rent chargeable to tax 2,426,000
Less: Admissible deductions
Repair allowance [2,250,000 x 1/5] (450,000)
1,976,000

(W-2) Non-adjustable advance

Received from Zafar 2,500,000
Less: Already taxed
- In TY 2016 (2,500,000/10) (250,000)
- In TY 2017 (2,500,000/10) (250,000)
- In TY 2018 (2,500,000/10) (250,000)
- In TY 2019 (2,500,000/10) (250,000)
1,500,000 /10 150,000
(W-3) Income from other sources
Security guard's salary [50,000 x 12] 600,000
Less: Payment for security services [40,000 x 12] (480,000) 120,000

Deposit for vacating the office [(2,400,000–2,000,000)/10] 40,000

Rentals from lease of factory with machinery [500,000 x 7] 3,500,000
Additional payment of delayed refund [S.39(1)(cc)] 30,000
Income from other sources 3,690,000

Answer 16

Kashif
Computation of income for tax year 2023
Income from property Rupees
Monthly rent from Ahmed (300,000×3) 900,000
Forfeited deposit 3,500,000
Monthly rent from Rashid (300,000×8) 2,400,000
Non-adjustable security deposit from Rashid (2,450,000(W-1)÷10) 245,000
7,045,000

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Chapter 6 INCOME FROM PROPERTY

Less: Repair allowance @ 20% (1,409,000)

Total income from property 5,636,000

Income from other sources

Security charges (40,000×11) 440,000
Electricity generation (50,000×11) 550,000
990,000
Less: Security guard's salary - 20% is personal expense (288,000)
(360,000×80%)
Less: Cost of running electricity generator (450,000)
252,000
Total income 5,888,000

W-1:
Non-adjustable security deposit from Rashid 3,500,000
Less: Previous advance from Ahmed charged to tax (1,050,000)
[(3,500,000÷10)×3]
2,450,000

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