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SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY

TAX YEAR 2013

TAXATION OF INCOME FROM PROPERTY


TAX YEAR 2013(1st July 2012 TO 30th June 2013)
(SECTIONS15,16,155&169)

BASIS OF TAXATION

1. Income from property is taxable as a separate block of income on grossrentalreceipts.InFinanceAct2010wordssection155wereomitted fromsection169meaningbythatthissourceofincomehasbeenshifted backtonormaltaxregime.Consequentlyalltaxcreditsareallowablew.e.f. taxyear2011
BEFORE INSERTION THROUGH FINANCE ACT, 2010

The basis of taxation of Income from Property both i.e. (where withholding tax deducted or no withholding tax is deducted) was coveredunderFinalTaxRegime. 2. Incomefrompropertyistaxableonthebasisofgrossrentalreceiptsandno deductionofanyexpenditureisallowableagainstreceiptsasaSeparate BlockofIncome.Howeverafteromissionofsection155fromsection169, alltaxcreditsareadmissibleagainsttaxliability.
CHARGEABLE AMOUNT [SECTION 15 & 16]

1. Therentreceivedorreceivablebyapersonforataxyearischargeableto tax(includesanyforfeiteddeposit)inthatyearunderthehead Income fromProperty. 2. Accordinglytherentreceivedorreceivableforataxyearischargeableto taxwhethertherenthasbeenactuallyreceivedduringtheyearornot. 3. Incasetherentreceivedorreceivablebytheownerislessthanthefair marketrentofthelandorbuilding,theamountchargeabletotaxwillbe the fair market rent. The fair market rent is not defined in the Ordinance,itmeanstherentthepropertywouldordinarilyfetchintheopen market.[Sec.15(4)] Page1of7

SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY

TAX YEAR 2013

4. Wherethefairmarketrentisincludedintheincomechargeabletotaxunder theheadsalarytheprovisionsmentionedinclause3abovewillnotbe applicable.[Sec.15(5)]


DEFINITION OF RENT

Theterm rent hasbeendefinedinSection15(2)oftheOrdinanceto meananyamountreceivedorreceivablebytheowneroflandorabuildingas considerationfortheuseoroccupationof,ortherighttouseoroccupy,thelandor building,andincludesanyforfeiteddepositpaidunderacontractforthesaleof landorabuilding.

INCLUSIONS IN RENT [SECTION 16]

1. Anyamountreceivedbywayofadvanceordepositorpugreebytheowner ofimmoveablepropertyfromatenant,whichisnotadjustableagainstthe rent payable by the tenant, shall, as provided in section 16(1) be chargeabletotaxinequalproportionintenyearsfromthetaxyearinwhich itwasreceived. 2. Incasethetenantvacatesthepremisesbeforetheexpiryof10years,no portionofamountshallbeallocatedtotheincomeoftheyearinwhichitis refunded and thereafter. If the property is let out to another tenant, the amountreceivedfromothertenantwhichisnotadjustableagainsttherent willbereducedbytheamountofpreviousamountchargedtotaxandthe balance shall be deemed to be income and subjected to tax in equal proportioninsubsequent10yearsasmentionedinpara1above.
EXCLUSIONS FROM RENT [SECTIONS 15(3) & (3A)]

1. Section15(3)providesthattherentinrespectoftheleaseofabuilding togetherwithplantandmachineryshallnotbechargeabletotaxunderthe headofIncomefromPropertybutshallbetaxedundertheheadIncome fromOtherSources.

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SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY

TAX YEAR 2013

2. Similarly u/s 15(3A) any amount included in rent which relates to the provisionofamenities,utilitiesorotherservicesconnectedwiththerenting ofthebuildingshallbeexcludedfromrentalincomeandbechargeableto taxunderthehead IncomefromOtherSources insteadofIncome fromProperty.
EXEMPTIONS

1. Therentreceivedorreceivableshallnotbechargeabletotaxinrespectof ataxpayerwho i. Isanindividualorassociationofperson ii. Derives income chargeable to tax under this section not exceeding Rs.150,000/inataxyear;and iii. Doesnotderivetaxableincomeunderanyotherhead.
NOTE:AsperFBRclarificationvideCircularNo.3of2007dated29.9.2007

incaseapersonearnedsalaryincomeofRs.150,000/andalsoearned propertyincomeofRs.150,000/hispropertyincomewillnotbeexempted butchargeabletotax@5%ashehasdrawntaxablesalaryincomeofRs. 150,000/althoughitisbelowthetaxablelimitbutchargeable@0%.

2. PropertyincomeheldunderTrustetcforreligiousandcharitablepurposes underclause(59)PartIofSecondSchedule. Anyincomefrompropertyheldundertrustareexemptprovided thatthisclauseshallnotapplytosomuchoftheincomeasis notexpendedwithinPakistan


TAX RATE

Undersection15(6)theincomefrompropertyisliabletotaxattherate specifiedinDivisionVIofPartIoftheFirstSchedule,whichareasunder:
INDIVIDUAL, ASSOCIATION OF PERSONS & COMPANIES

APPLICABLE TAX RATE TO BE PAID AND TO BE DEDUCTED (WHT) Page3of7

SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY
PARTICULARS INDIVIDUAL & AOP
NIL

TAX YEAR 2013

COMPANIES

WHERETHEGROSSAMOUNTOF RENTDOESNOTEXCEEDRS. 150,000/ WHERETHEGROSSAMOUNTOF RENTEXCEEDSRS.150,000/ BUTDOESNOTEXCEEDRS. 400,000/ WHERETHEGROSSAMOUNTOF RENTDOESNOTEXCEEDRS. 400,000/

5%PERCENTOFTHE GROSSAMOUNT EXCEEDING RS.150,000/ 5%PERCENTOFTHE GROSSAMOUNTOFRENT RS.20,000/PLUS7.5%OF THEGROSSAMOUNT EXCEEDING RS.400,000/ RS.65,000/PLUS10%OF THEGROSSAMOUNT EXCEEDING RS.1,000,000/

WHERETHEGROSSAMOUNTOF RS.12,500/PLUS7.5% RENTEXCEEDSRS.400,000/ OFTHEGROSSAMOUNT BUTDOESNOTEXCEEDRS. EXCEEDINGRS.400,000/ 1,000,000/ RS.57,500/PLUS10%OF WHERETHEGROSSAMOUNTOF THEGROSSAMOUNT RENTEXCEEDSRS.1,000,000/ EXCEEDINGRS. 1,000,000/

WITHHOLDING TAX PROVISIONS


[SECTION155&169]

1. Everyprescribedpersonmakingapaymentinfullorpart(includinga payment by way of advance) to any person on account of rent of immoveableproperty(includingrentoffurnitureandfixturesandamountof servicesrelatingtosuchproperty)shalldeducttaxfromthegrossamountof rentpaidattheratespecifiedinDivisionVofPartIIIoftheFirstSchedule. 2. i. ii. iii. iv. v. Inthissectionprescribedpersonmeans: TheFederalGovernment. AProvincialGovernment. ALocalAuthority. ACompany. ANonprofitOrganization. Page4of7

SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY

TAX YEAR 2013

vi. ADiplomaticmissionofaforeignstate;or vii. Any other person notified by the Central Board of Revenue for the purposeofthissection. 3. Above stated persons shall be Withholding Agents for tax collection on paymentofRent. WITHHOLDING TAX RATE TheratesofwithholdingtaxspecifiedinDivisionVofPartIIIoftheFirst Scheduleare:
INDIVIDUAL, ASSOCIATION OF PERSONS & COMPANIES

APPLICABLE TAX RATE TO BE PAID AND TO BE DEDUCTED (WHT)


PARTICULARS INDIVIDUAL & AOP
NIL

COMPANIES

WHERETHEGROSSAMOUNTOF RENTDOESNOTEXCEEDRS. 150,000/ WHERETHEGROSSAMOUNTOF RENTEXCEEDSRS.150,000/ BUTDOESNOTEXCEEDRS. 400,000/ WHERETHEGROSSAMOUNTOF RENTDOESNOTEXCEEDRS. 400,000/

5%PERCENTOFTHE GROSSAMOUNT EXCEEDING RS.150,000/ 5%PERCENTOFTHE GROSSAMOUNTOFRENT RS.20,000/PLUS7.5%OF THEGROSSAMOUNT EXCEEDING RS.400,000/ RS.65,000/PLUS10%OF THEGROSSAMOUNT EXCEEDING RS.1,000,000/

WHERETHEGROSSAMOUNTOF RS.12,500/PLUS7.5% RENTEXCEEDSRS.400,000/ OFTHEGROSSAMOUNT BUTDOESNOTEXCEEDRS. EXCEEDINGRS.400,000/ 1,000,000/ RS.57,500/PLUS10%OF WHERETHEGROSSAMOUNTOF THEGROSSAMOUNT RENTEXCEEDSRS.1,000,000/ EXCEEDINGRS. 1,000,000/

STATEMENTS TO BE FIELD

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SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY

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1. The Prescribed person, who has deducted tax from the income from property,shallfurnishamonthlyandannualprescribedstatementwithin15 daysofthecloseoftheeachmonthandwithin2monthsofendofthe financialyearrespectivelywiththeCommissionerofIncometaxconcerned. 2. In case of corporate withholding agents efiling of monthly and annual statementsofdeductionoftaxisobligatory.
EXEMPTION FROM WITHHOLDING TAX

The following clauses of The Second Schedule provide exemption from deductionofwithholdingtaxfromrent:
CLAUSE (16) OF PART I

InstitutionsoftheAgaKhanDevelopmentNetwork(Pakistan)listedin Schedule 1 of the Accord and Protocol dated November 13, 1994, executedbetweentheGovernmentoftheIslamicRepublicofPakistan andAgaKhanDevelopmentNetwork.
CLAUSE (47) OF PART I

ApersonwhoproducesacertificatefromtheCommissionertotheeffect thathisincomeduringtheincomeyearisexemptfromtax. MISCELLANEOUS PROVISIONS


EXEMPTION FROM ADVANCE TAX PAYMENT

Onincomefrompropertynoadvancetaxpayableundersection147(1)(ba) oftheIncomeTaxOrdinance.
REFUND/ADJUSTMENT

1. The withholding tax deducted shall be refundable in case of IndividualsandAOPiftherentdoesnotexceedRs.150,000andnotaxable incomeisderivedunderanyotherheadofincome.

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SULTANTAXASSOCIATES TAXATIONOFINCOMEFROMPROPERTY

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2. Similarly,thetaxdeductedfromamountscoveredintheexclusions fromrentwillbetreatedasAdvancetaxandadjustedinthetaxchargeable onIncomefromOtherSources.


JOINTLY-OWNED PROPERTY

1. Incaseofjointlyownedpropertyincomefrompropertyisnotassessedas AOP. 2. Wherethepropertyisownedbytwoormorepersonsandtheyhavedefinite and ascertainable share in such property, each person is required to declarehisrespectiveshareofincomefrompropertyinhistaxableincome fortheyear.

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