PAKISTAN TAX BAR ASSOCIATION Presentation on Income from

PAKISTAN TAX BAR ASSOCIATION Presentation on Income from Property and Deductions at PTBA Summer Camp-2009 by Mr. Muhammad Younus Ghazi B. Com (Hons); M. Com; FCA Chartered Accountant Multan

Income from property and deductions n n n Basis of charge (sec. 15) Necessary condition Land or building (Sec. 15(2)) Person should be owner of the property Where letting out is subservient and incidental to the business Self occupied houses where rent is also receivable by the owner (Sec. 15(5))

Income from property and deductions n n n Fair market rent – determination of (Sec. 15(4)) Treatment of non adjustable amounts (Sec. 16(1) to 16(3)) Non adjustable advance rent or pugree or security If tenant vacates the premises before the expiry of ten years (Sec. 16(2)) Where on vacancy before 10 years, non adjustable sum is received from a new tenant (Sec. 16(3))

Income from property and deductions n n n Exemptions in respect of certain properties Any income of a trust or a welfare institution or a non profit organization (Cl. (58), Part 1, 2 nd Sch. ) Exemption in respect of income from property held under trust etc, for religious and charitable purposes (Cl. (59), Part 1, 2 nd Sch. ) Deduction at source in respect of certain properties (Sec. 155) Permissible deductions (Sec. 17)

Income from property and deductions Liability in case of co-owners (Sec. 66) n Definite and ascertainable shares (Sec. 66) n

Law Involved Sections 15, 16, 17, 66, 67, 101(9), 155 involved. n 1 st Schedule – Rate of Tax n 2 nd Schedule Part I clauses 58 and 59 - Exemptions n

Basis of charge n n n n Normal income after allowing admissible deduction Uptil 30 -6 -2005 (Y. T. 2006) Separate Block of income Tax @ 5% of Gross amount of Rent (Full and Final Discharge) From 1 -7 -2006 (Tax Year 2007 on wards) Section 17 Deleted as Taxation was on Gross Rental Income, Progressive Rate of Tax in Final Discharge From 1 -7 -2008 (Tax Year 2009) Notional concept of ALV (Annual letting value) Uptil (30 -6 -2002) Actual Concept (Received or Receivable) From 1 -7 -2002 (T. Y. 2003 onwards

Rent Received on Reward by Owner of Land n Building n Consideration for use or Occupation or Right n to use or occupy n Includes forfeited deposit for sale of Land or building n

Fair Market Value It is a Deeming provision. n It applies when rent received is less than fair market n value (FMV) Section 15(4) n This provision will not apply where FMV is n included in Salary Income Section 15(5) n

Income from property and Its Computation