Chapter No.

7 Income from Property

Chapter No. Seven
Income from Property

LO # Learning Objectives Question Reference

LO 1 Basics

LO 2 Amounts Chargeable Under the head “Income from

Property”

LO 3 Un adjustable Amount

LO 4 Exceptions/Chargeable under the head “Income from

Other Sources”

LO 5 Deductions

LO 6 Definitions

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Chapter No. 7 Income from Property
Section A
LO 1: BASICS
RENT DEFINITION:
“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.
BASIS OF TAXATION:
Rent for the tax year is chargeable on accrual basis under „income from property‟.
LO 2: AMOUNTS CHARGEABLE UNDER THE HEAD “INCOME FROM PROPERTY”:
CHARGEABLE RENT: (SURF)
a) SIGNING AMOUNT:
Signing amount from the tenant is taxable under the head “Income from Property”.
(Signing amount is the amount paid by the tenant to the owner to enter in the tenancy
agreement which is not refundable nor it can be termed as deposit).
b) UN ADJUSTABLE/NON ADJUSTABLE AMOUNT:
10% of deposit from the tenant (not in the case of open plot of land).
c) RENT:
Rent of land or building (actual rent or fair market rent whichever is higher or Annual
Letting Value (ALV).
d) FORFEITED DEPOSIT:
Forfeited deposit under a contract for the sale of land or building.
e) OBLIGATION OF THE OWNER:
Any obligation of the owner paid by the tenant.

LO 3: UN ADJUSTABLE AMOUNT RECEIVED IN RESPECT OF BUILDING:

I. Where the owner of a building receives any amount (deposit or pugree) not adjustable against
rent payable the same is treated as chargeable rent in 10 years in equal proportion.
II. However, if before the expiry of 10 years the said amount is refunded by the owner then no
portion of the said amount is taxable in the year in which it is refunded.
III. If the owner lets out the same building to another tenant and receives any un adjustable amount
then the amount already taxed in this respect shall be deducted and the balance shall be treated as
rent chargeable in 10 years in equal proportion.
Example No.1: Mr. Imran has rented out his house to Mr. Ramzan on 1st January 2010 at a monthly
rent of Rs. 50,000. Mr. Imran received an unadjustable amount of Rs. 500,000 from Mr. Ramzan. Mr.
Ramzan vacated the property on 31st December 2012 and on the same date Mr. Imran rented out the
same house to Mr. Eid at a monthly rent of Rs.80,000 and received an unadjustable amount of Rs.
1,000,000 from Mr. Eid.
Required: Calculate taxable property income for the tax year 2011 to tax year 2013.
Solution: Mr. Imran
Resident: Non Salaried
Tax Year:2011,2012
Computation of Property Income: Rs.
Income from Property
Rent (50,000 x 12) 600,000
Unadjustable amount (500,000 x 1/10th) 50,000
Taxable Property Income 650,000

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Chapter No. 7 Income from Property
Mr. Imran
Resident: Non Salaried
Tax Year:2013
Computation of Property Income: Rs.
Income from Property
Rent from Mr. Ramzan(50,000 x 06) 300,000
Rent from Mr. Eid (80,000x06) 480,000
Unadjustable amount (500,000 x 1/10th) 1,000,000
Less: Amount already taxed
Tax Year:2011 50,000
Tax Year:2012 50,000 (100,000)
(900,000 x 1/10) 90,000
Taxable Property Income 870,000

Exam Tips
a) Advance which is adjustable against rent payable is not taxable separately as the same
is a part and parcel of rent chargeable on accrual basis.
b) If deposit is refunded in the same tax year then there will be no tax treatment in respect
of the deposit.

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Chapter No. 7 Income from Property
SECTION B: EXCEPTIONS

LO 4:EXCEPTIONS TO INCOME FROM PROPERTY/CHARGEABLE UNDER THE HEAD

INCOME FROM “OTHER SOURCES”:
The following are taxable under the head ‘Income from Other Sources’:
 Rent in respect of a building together with plant and machinery
 Any amount in respect of amenities, utilities or other service charges in respect of land or
building.
 Where a taxpayer receives any amount for vacating the possession of any building or any part of
the building, such income less the amount paid by him for taking the possession of that building
shall be deemed as his income. This will be charged to tax under the head „income from other
sources‟ in ten years in equal proportion.
 Ground Rent.
 Subletting of Immoveable Property.

Exam Hint
Rent from Agriculture land is exempt from tax.

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Chapter No. 7 Income from Property
SECTION C: DEDUCTIONS/ADMISSIBLE EXPENSES
LO 5:DEDUCTIONS:
Income from property is taxable under the normal tax structure (Optional) at chargeable rent minus
allowable deductions along with other normal taxable income. Allowable deductions from chargeable rent
are as under:
i. Repairs allowance: 1/5th of chargeable rent of building (ignore actual expense).
ii. Insurance in respect of building.
iii. Property related taxes including to government authorities.
iv. ground rent payable/paid for the property.
v. Interest or mark up or profit paid on any money borrowed to acquire, construct, renovate, extend,
or reconstruct the property.
vi. Share of rental income including shares towards appreciation in the value of property to HBFC or
a scheduled bank, where the property is acquired, constructed, renovated, or reconstructed with
capital contributed by HBFC or scheduled bank.
vii. Where the property is mortgaged, the profit or interest paid.
viii. Legal charges to defend title of the property or any suit connected with the property in a court.
ix. Any other expenses (not exceeding 4% of chargeable rent) paid or payable wholly and
exclusively for the purpose of deriving rent including administration and collection charges.
x. Unpaid rent considered as irrecoverable subject to the following conditions:
a) Tenancy was bona fide;
b) The defaulting tenant has vacated the property or steps have been taken to compel him to
vacate the property;
c) The defaulting tenant is not in occupation of any other property of the landlord;
d) Legal proceeding has been initiated to recover unpaid rent or there are reasonable ground
to believe that legal proceeding would be useless; and
e) Unpaid rent was previously chargeable to tax.
Note:If unpaid rent allowed as a tax expense is subsequently recovered then the same shall be taxable.
NOTES FOR STUDENTS
 Any expenditure allowed under this head shall not be allowed under any other head.
 The deductions which are not allowed under the head „Income from Business‟ will also not be
allowed under the head „Income from Property‟.

Example:2 Mr.A has provided you the following information for the tax year 2021:
Annual gross rent Rs.4,800,000
Actual Repairs Rs.800,000
Allowable deductions Rs.700,000 other than Repairs
Income from salary Rs.5,000,000
Compute taxable income of Mr.A for the tax year 2021.

Ans
Mr. A
Resident:Non Salaried
Tax Year:2021
Computation of Taxable Income: Rs.
Income from Salary 5,000,000
Income from Property (W-1) 3,140,000
Taxable Income 8,140,000

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Chapter No. 7 Income from Property
(W-1) Income from Property: Rs.
Gross Rent 4,800,000
Less: Admissible Deductions
Repairs (1/5th x 4,800,000) 960,000
Other deductions 700,000 (1,660,000)
Taxable Property Income 3,140,000

SECTION D: DEFINITIONS

LO 6: DEFINITIONS:
CO-OWNERSHIP/JOINT OWNERS:
Co-ownership of property is not considered as an AOP for the purpose of rental income and therefore
rental income is not taxable as a separate tax entity. Share of rental income minus allowable deductions, if
applicable, is taxable in the hands of each co-owner.

EXAM HINT
 Where any property income chargeable under the head property income 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 principles of taxation for AOP.
 If an 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.

UNPAID LIABILITY:
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 shall be chargeable under the head „Income from Property‟ in the first tax year
next following the end of the three years.
Subsequently if the person pays the liability then that person shall be allowed as deduction of the amount
paid in the tax year in which it is paid.

Example No.3(Utilities)
Mr. Asim rented out his own house to Mr. Babar against a rent of Rs. 55,000/month. As per the terms Rs.
5,000 is charged against rendering of utility and sweeper services. This Rs. 5,000 is included in Rs.
55,000/month. The actual expenditure incurred by Mr. Asim are :
Repair of house 7,000/month
Property tax of house 2,100/month
Utility bills 1,800/month
Sweeper wages 1,000/month
His Salary income in current year is Rs. 900,000.
Required: Calculate his tax liability?

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Chapter No. 7 Income from Property
Ans.
[Link]
Resident:Non Salaried
Tax Year:2017
Computation of Taxable Income Rs.
Income from Salary 900,000
Income from Property (W-2) 454,800
Income from Other Sources(W-1) 26,400
Taxable Income 1,381,200

W-1: Income from Other Sources

Amount charged from tenant (5,000x12) 60,000
Less: Actual expense incurred
-Utilities (1,800x12) 21,600
-Wages (1,000x12) 12,000 (33,600)
Income from Other Sources 26,400
W-2: Income from Property
Amount charged as rent (55,000x12) 660,000
Less: Amount received for other services (5,000x12) (60,000)
Rent Chargeable to Tax (RCT) 600,000
Less: Admissible Deductions
Repairs (1/5th x 600,000) 120,000
Property tax (2100 x 12) 25,200 (145,200)
Taxable Property Income 454,800

Example No.5: (Non Adjustable Amount)

Mr. A has rented out his house to Mr. H on 1 September,2009 for a monthly rent of Rs. 35,000 due to his
friendship. Fair market rental of house is Rs. 40,000/month. He also received Rs. 300,000 as non
adjustable amount on 1 September,2009. Further the
house was given on rent by Mr. A to Mr. S on 1 June, 2012 at a monthly rental of Rs. 45,000/month. Mr.
S gave Rs. 500,000 as non adjustable amount of which was partly used to make payment of Rs. 300,000
to Mr. H who vacated the house on 31 May, 2012.
Required: Calculate Income from Property for TY 2010,2011 and 2012?
Ans. Rs.
Income from Property (Tax Year:2010):
Rent (higher of)
-actual 35,000
-FMR 40,000 40,000x10 400,000
Unadjustable amount (1/10th of 300,000) 30,000
RCT 430,000
Less: Repairs (1/5th x 430,000) (86,000)
Income from Property 344,000

Income from Property (Tax Year:2011):

Rent 40,000x12 480,000
Unadjustable amount (1/10th of 300,000) 30,000
RCT 510,000
Less: Repairs (1/5th x 510,000) (102,000)
Income from Property 408,000

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Chapter No. 7 Income from Property
Income from Property (Tax Year:2012):
Rent from H 40,000x11 440,000
Rent from S 45,000x1 45,000
Unadjustable amount 500,000
Less: Amount already deducted:
For tax year 2010 (30,000)
For tax year 2011 (30,000)
440,000x1/10th 44,000
RCT 529,000
Less: Repairs (1/5th x 529,000) (105,800)
Income from Property 423,200

Example No.6: (Advance Rent)

Mr. A has rented out his property on July 1, 2010 against which he received Rs. 120,000 as an advance on
July 1, 2010 which is adjustable against monthly rental in 24 monthly installments. The monthly rental
per month agreed is Rs. 30,000. Consequently he received Rs. (30,000 –(120,000/24)) = 25,000 at the
end of each month in TY 2011.
Required: Calculate his Income from Property for TY 2011?

Ans. Rs,
Income from Property (Tax Year:2011):
Rent 30,000x12 360,000
Less: Repairs (1/5th x 360,000) (72,000)
Income from Property 288,000

Example No.7: (Two Houses)

Mr. A has two houses. House #1 is given on rent to an individual and house #2 is given to a company.
House Rent/month Amount Charged/month for Utilities Act. Exp of 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

Ans. Mr.A
Resident:Non-Salaried
Tax Year:2017
Computation of Taxable Income: Rs.
Income from Business 700,000
Income from Property (W-1) 739,200
Income from Other Sources
House#1 (15,000-10,000)x12 60,000
House#2 (18,000-3,000)x12 180,000
Taxable Income 1,679,200
W-1: Income from Property:
House#1 (40,000-15,000)x12 300,000
House#2 (70,000-18,000)x12 624,000
RCT 924,000
Less: Deductions
Repairs (1/5th x 924,000) (184,800)
Income from Property 739,200

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Chapter No. 7 Income from Property
Example No.8: (Joint Owners)
Mr. A and B are joint owners of a house and they have provided the following data:
Profit sharing ratio amongst A and B 60:40
Rental income earned from house for TY 2013 3,000,000
Required: Calculate tax liability for A and B?

Ans.
Computation of Taxable Income (Mr.A): Rs.
Income from Property
Rent (3,000,000 x 60%) 1,800,000
Less: Admissible Deductions
Repairs (1/5th x 1,800,000) (360,000)
Table property income 1,440,000
Taxable income 1,440,000

Computation of Taxable Income (Mr. B) Rs.

Income from Property
Rent (3,000,000 x 40%) 1,200,000
Less: Admissible Deductions
Repairs (1/5th x 1,800,000) (240,000)
Table property income 960,000
Taxable income 960,000

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Chapter No. 7 Income from Property
ICAP PAST PAPER QUESTIONS

Q.1 (a) (i) Explain the term „Rent‟ in context of „Income from property‟. (02)
Describe the rent in the context of income from property. (02)
(A 2006,S 2015)
(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)

(b) On 1 July 2014, Fahim agreed to rent out a house to Mirza at a monthly rent of
Rs. 180,000 with effect from 1 August 2014 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 amounting to Rs. 400,000 received from the previous tenant in July
2010 and partly used for renovation of the house.

Fahim also incurred the following expenses in respect of the above house:
(i) property tax of Rs. 15,000.
(ii) payment of interest amounting to Rs. 200,000 to his friend against amount
borrowed for renovation of the house.
(iii) insurance premium of Rs. 110,000.
(iv) Rs. 5,000 per month to Wasif for collection of rent.
Required:
Under the provisions of the Income Tax Ordinance, 2001 compute the taxable income
of Fahim for tax year 2015 assuming he has no other income. (07)
(Spring 2015,Q.4)
Q.2 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.
(Spring 2014,Q.4)(10)

Q.3 Discuss the provisions of the Income Tax Ordinance,2001 regarding non adjustable amount
received from a tenant by the owner of the building. (05)
(March 2009,Q.4b)

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Chapter No. 7 Income from Property
Q.4 [Link] ud din has recently constructed an office complex for the purposes of letting out. As per
terms and conditions, [Link] ud din is also entitled to signing amount, which is not refundable. For the
tax year 20X8 following information has been provided to you for the computation of his income from
property:
Rupees

Rent for the year already received 1,150,000

Rent for the year though due but irrecoverable 50,000
signing amount (non adjustable) 100,000
Fire and tax paid to the local authority 20,000
Lawyer‟s fee for suit to recovery rent 50,000
Lawyer‟s fee for drafting master rent agreement 10,000
Salary of the caretaker who collects monthly rent 46,000
Insurance premium being 1% market value of the property 200,000
Repair maintenance expenditure 50,000 (10)
(March 2003,Q.5)
Q.5 On 1 July 2015 Farrukh borrowed Rs. 8,000,000 from Star Bank Limited and acquired a plot of
land in Hub Industrial Zone for Rs. 6,500,000. He invested the rest of the loan in a business
venture with his friend. The above loan carries mark-up at a rate of 12% per annum and is
repayable in eight equal quarterly instalments starting from 1 July 2016. On 1 August 2015
Farrukh decided to sell the plot of land to Zulfiqar Motors for Rs. 10,000,000 and received a
deposit of Rs. 500,000 from them. On 15 August 2015 Farrukh forfeited the deposit on refusal of
Zulfiqar Motors to purchase the plot of land.

On 1 September 2015 Farrukh let out the plot of land to his friend Atif at a monthly rent of Rs.
150,000. He received an un-adjustable deposit of Rs. 200,000 from Atif and paid Rs. 80,000 for
levelling the ground, Rs. 50,000 as ground rent, Rs. 62,000 as insurance premium against the risk
of damage or destruction by water logging and Rs. 140,000 against rent collection charges.
Farrukh had paid Rs. 25,000 to a firm of professional valuers which determined the annual rental
value of the 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 2016. (12)
(A 2016 Q.4)
Q.6 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)
(S 2019,Q.3c)
Q.7 Farhan and Imran jointly own a building in Quetta. The building has been rented out to a
company. Discuss the tax treatment of income from such property. (02)
(Q.3(e), September 2019)
Q.8 Explain the term „Rent‟ with relation to „Income from property‟. (02)
(Q.2(a), September 2019)

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Chapter No. 7 Income from Property
Q.9 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:
Rupees
Monthly rent 300,000
Non-adjustable security deposit 3,500,000
Monthly security charges 40,000
In addition to the above, Kashif also provides Ahmed with backup electricity from a generator
during load shedding 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)

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Chapter No. 7 Income from Property
SUGGESTED SOLUTION
A.1a)i Rent:
“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.

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
Sources‟.
 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
Sources‟.

b) [Link]
Taxable income and tax thereon
Tax Year:20X5

Computation of Taxable Income: Rs.

Income from property (W-1) 1,255,200
Taxable Income 1,255,200

(W-1) Income from Property: Rs.

Chargeable rent (180,000x11) 1,980,000
Non adjustable amount 800,000
Less amount already taxed
TY 20X1 (400,000x1/10) (40,000)
TY 20X2 (40,000)
TY 20X3 (40,000)
TY 20X4 (40,000)
(640,000x1/10) 64,000
Gross rent chargeable to tax 2,044,000
Less: Admissible Deductions:
Repairs (1/5 x 2,044,000) 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 (5,000 x 11) 55,000; or 55,000 (788,800)
 (4% x 2,044,000) 81,760

Taxable Property Income 1,255,200

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Chapter No. 7 Income from Property
A.2 Taxable Income of Bashir: Rs.
Income from Property (W-1) 1,934,950
Income from Other Source (W.2) ` 907,50
Taxable Income 2,842,450
Computation of Tax Liability (Non Salaried):
Tax on Rs.2,842,450
Tax on Rs.(1,600,000) 170,000
Tax on Rs. 1,242,450 x 30% 372,735
Tax Liability 542,735

Taxable Income of Jameel: Rs.

Income from Property (W-1) 644,984
Income from Other source (W.2) (1,210,000x25%) 302,500
Taxable Income 947,484
Computation of Tax Liability(Non Salaried):
Tax on Rs.947,484
Tax on Rs.(600,000) -
Tax on Rs. 347,484 x 15% 52,123
Tax Liability 52,123

W.1 Income from Property: Rs.

Annual Receipts 6,500,000
Less: Receipts relating to next year (6,500,000/12x2) (1,083,333)
Receipts relating to current year 5,416,667
Less: Income chargeable under the head income from other sources (186,000x10) (1,860,000)
Rent chargeable to tax 3,556,667
Less: Admissible Deductions:
Repairs (1/5th x 3,556,667) (711,333)
Insurance premium (240,000)
Collection Charges (lower of)
 Actual charges = 25,400; or
 4% x 3,556,667 = 142,267 (25,400) (976,733)
Taxable Property Income 2,579,934

Share of Bashir (2,579,934x75%) 1,934,950

Share of Jamil (2,579,934x25%) 644,984

W.2 Income from Other Sources:

Rent charged for utilities, cleaning and security 1,860,000
Less: Utilities, cleaning and security expense (650,000)
1,210,000
Share of Bashir (1,210,000x75%) 907,500
Share of Jameel (1,210,000x25%) 302,500

A.3 Un adjustable Amount Received in Respect of Building:

Where the owner of a building receives any amount (deposit or pugree) not adjustable against rent
payable the same is treated as chargeable rent in 10 years in equal proportion.
However, if before the expiry of 10 years the said amount is refunded by the owner then no portion of
the said amount is taxable in the year in which it is refunded.

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Chapter No. 7 Income from Property
If the owner lets out the same building to another tenant and receives any un adjustable amount then
the amount already taxed in this respect shall be deducted and the balance shall be treated as rent
chargeable in 10 years in equal proportion.
A.4 Computation of Taxable Income: Rs.
Income from Property (W-1) 602,000
Taxable Income 602,000
(W-1) Income from Property: Rs.
Annual Rent received 1,150,000
Irrecoverable rent for the year 50,000
Non Adjustable amount (100,000 x 1/10) 10,000
1,210,000
Less: Admissible Deductions:
Repairs (1/5th x 1,210,000) (242,000)
Fire tax paid to local authorities (20,000)
Lawyer‟s fee for recovery (50,000)
Collection charges and other admin (lower of)
 Actual (46,000)
 4% x 1,210,000 48,400
Insurance premium (200,000)
Bad debts (50,000) (608,000)
Taxable Property Income 602,000

A.5 Farukh
Taxable Income
Tax Year: 2016
Computation of Taxable Income: Rs.
Income from Property (W-1)

(W-1)Income from Property:

Forfeited Deposit 500,000
Rent of plot of land (Higher of (2,160,000/12x10) or (150,000x10) 1,800,000
Un adjustable Amount (N-1) -
RCT 2,300,000
Less: Admissible Deductions:
Repairs (Not allowed in case of land)
Insurance premium 62,000
Collection Charges (Lower of)
 Actual = 140,000; or
 4% x 2,300,000 = 92,000
Mark up on loan (6,500,000 x 12% x 10/12) 650,000 (804,000)
Taxable Property Income 1,496,000

(N-1) No tax treatment of unadjustable amount in case of open plot.

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Chapter No. 7 Income from Property
A.6 Mr. Zahid
Taxable Income and Tax Thereon
Tax Year: 20X8
Computation of Taxable Income: Rs.
Income from Property (W-1) 2,705,000
Income from Other Sources
Amount charged for amenities, utilities etc. (100,000 – 35,000) x 12 x60% 468,000
Taxable Income 3,173,000

(W-1): Income from Property Rs.

Monthly rent (40,000x12) 480,000
Non adjustable amount 300,000
Less: Already taxed
TY:2014 – TY:2018 (175,000/10) x 5 years (87,500)
212,500 x 1/10 21,250
Rent from bank (6,000,000 –(100,000 x 12) x 60% 2,880,000
Gross Rent 3,381,250
Less: Admissible Deductions:
Repairs (3,381,250 x 1/5) (676,250)
Taxable Property Income 2,705,000

A.7 Where any property is owned by two or more persons and their respective shares are definite and
ascertainable
i. The persons shall not be assessed as an AOP in respect of the property; and
ii. The share of each person in the income from property for a tax year shall be taxable in
their own hands respectively and not as AOP.
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.

A.8 Notes (LO 1)

16 By:Abdul Rehman Tax Year:2025

Chapter No. 7 Income from Property
A.9
Kashif
Computation of income for tax year 2023
Rupees
Income from property (W-1) 5,360,000
Income from Other Sources (W-2) 252,000
Total income 5,888,000
(W-1) 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-1.1)÷10) 245,000
Gross Rent 7,045,000
Less: Deductions
Repair allowance @ 20% (1,409,000)
Total income from property 5,636,000
W-1.1:
Non-adjustable security deposit from Rashid 3,500,000
Less: Previous advance from Ahmed charged to tax [(3,500,000÷10)×3] (1,050,000)
2,450,000
W-2 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 (360,000×80%) (288,000)
Less: Cost of running electricity generator (450,000)
Taxable Other Sources 252,000

17 By:Abdul Rehman Tax Year:2025