Tax Book 2023

Income From Property Chapter- 08

Calculation of rent chargeable to tax:

Rent receivable (10,000 x 12) 120,000

Not adjustable ( 200,000 – amount already charged to tax [Rs.100,000 x 3 / 10)] /10 17,000

Rent chargeable to tax 137,000

Important note: Practically when the tenant paid amount which is adjustable against rent then there

is no treatment required while computing the rent income because the same shall be automatically

(transferred by an adjusting accounting entry) to rent chargeable to tax on expiry of the period for

which the adjustable advance was received.

7. Liability in case of co-owners [U/s 66]

In case of co-ownership in property and the share of each co-owner is determinable then share

received by each co-owner from property shall be included in his total income but this principle will

not apply to business income i.e. business of renting out of land or building.

Signing amount from the tenant is taxable under the head "income from property". Signing means the

amount paid by the tenant to the owner to enter in the tenancy agreement which is neither refundable

nor it can be termed as deposit.

Example

Mr. A and Mr. B are co-owners of a property. Their share in the property is equal. They received

income from property of Rs. 400,000. Calculate the tax liability of both co-owners for the tax year

2023.

Solution: Mr. A Mr. B

Income from property:

Share of Mr. A (400,000 x 50% of gross receipts) 200,000

Share of Mr. B (400,000 x 50% of gross receipts) 200,000

200,000 200,000

Computation of Tax liability:

Tax payable by Mr. A and Mr. B:

Tax on Rs. 200 ,000 @ 0 % - -

i.e. 0 % upto Rs. 200 ,000

Example: Mr. X and Mr. Y are partners in “XY Associates”. Principal business of XY Associates is

running a hotel including renting out of rooms. Net income after deductions received (including room

rents) during the tax year was Rs. 500,000. Calculate the tax liability of firm and each partner for the

tax year 202 3 by assuming that share of each partner in profits of the firm is equal. Mr. X and Mr. Y

has no other source of income.

Solution:

In this case income is chargeable to tax under the head “Income from business” not under the head

“income from property.

(Rupees)

Income of the AOP 500,000

Tax liability [0% x 500,000] ---- 0 -----

As partners have no other source of income hence nothing shall be included in the income of

partners for rate purpose, hence, no tax is payable by the partners. Tax liability of the firm is Rs. 0.

8. Pakistan source & Foreign source property income

Geographical source of

property income

Received by Taxability