I have a salary and also rent out a house. Is the rent added to my salary for tax?

A salaried person who also lets out property has two heads of income, and the Income Tax Ordinance, 2001 taxes them together. The rates below are from the Ordinance as amended to 30 June 2026 and apply to tax year 2027 (1 July 2026 to 30 June 2027).

What does the law say?

The Ordinance classifies income under five heads: Salary, Income from Property, Income from Business, Capital Gains and Income from Other Sources. Section 15 puts rent under Income from Property.

Section 9 then says taxable income is total income “reduced (but not below zero) by the total of any deductible allowances”. Total income is the income under all heads added together. So there is one taxable income, and one set of rates is applied to it. Rent is not taxed on its own scale beside salary.

Before rent is added, section 15A allows deductions against it, including “an allowance equal to one-fifth of the rent chargeable to tax in respect of the building for the year” for repairs.

Which rate table applies: salaried or not?

Division I of Part I of the First Schedule has two tables for individuals.

• Clause (2) applies “Where the income of an individual chargeable under the head “salary” exceeds seventy-five per cent of his taxable income”.
• Clause (1) applies to other individuals and associations of persons.

The test compares salary with the whole taxable income, rent included. So adding rent can switch the table.

Clause (2): salary exceeds 75% of taxable income

Taxable income	Tax for tax year 2027
Up to Rs. 600,000	0%
Rs. 600,001 to Rs. 1,200,000	1% of the amount above Rs. 600,000
Rs. 1,200,001 to Rs. 2,200,000	Rs. 6,000 + 11% of the amount above Rs. 1,200,000
Rs. 2,200,001 to Rs. 3,200,000	Rs. 116,000 + 20% of the amount above Rs. 2,200,000
Rs. 3,200,001 to Rs. 4,100,000	Rs. 316,000 + 25% of the amount above Rs. 3,200,000
Rs. 4,100,001 to Rs. 5,600,000	Rs. 541,000 + 29% of the amount above Rs. 4,100,000
Rs. 5,600,001 to Rs. 7,000,000	Rs. 976,000 + 32% of the amount above Rs. 5,600,000
Above Rs. 7,000,000	Rs. 1,424,000 + 35% of the amount above Rs. 7,000,000

Clause (1): all other individuals

Taxable income	Tax for tax year 2027
Up to Rs. 600,000	0%
Rs. 600,001 to Rs. 1,200,000	15% of the amount above Rs. 600,000
Rs. 1,200,001 to Rs. 1,600,000	Rs. 90,000 + 20% of the amount above Rs. 1,200,000
Rs. 1,600,001 to Rs. 3,200,000	Rs. 170,000 + 30% of the amount above Rs. 1,600,000
Rs. 3,200,001 to Rs. 5,600,000	Rs. 650,000 + 40% of the amount above Rs. 3,200,000
Above Rs. 5,600,000	Rs. 1,610,000 + 45% of the amount above Rs. 5,600,000

The clause (2) table was substituted by the Finance Act, 2026.

Worked example (illustrative figures)

Case 1: rent is small next to salary. Ayesha works for a bank in Karachi. Salary Rs. 3,000,000. She lets a flat to a family for Rs. 50,000 a month.

1. Gross rent: Rs. 50,000 x 12 = Rs. 600,000.
2. Repairs allowance (one-fifth): Rs. 120,000. Income from Property: Rs. 480,000.
3. Taxable income: Rs. 3,000,000 + Rs. 480,000 = Rs. 3,480,000.
4. Salary share: Rs. 3,000,000 / Rs. 3,480,000 = about 86%, above 75%, so clause (2) applies.
5. Tax: Rs. 316,000 + 25% x (Rs. 3,480,000 - Rs. 3,200,000) = Rs. 316,000 + Rs. 70,000 = Rs. 386,000.
6. Tax on salary alone would be Rs. 116,000 + 20% x Rs. 800,000 = Rs. 276,000. The rent adds Rs. 110,000.

Case 2: rent tips salary below 75%. Bilal works in Lahore on Rs. 1,800,000 a year and lets a shop to a pharmacy company for Rs. 100,000 a month.

1. Gross rent: Rs. 1,200,000. Repairs allowance: Rs. 240,000. Income from Property: Rs. 960,000.
2. Taxable income: Rs. 1,800,000 + Rs. 960,000 = Rs. 2,760,000.
3. Salary share: Rs. 1,800,000 / Rs. 2,760,000 = about 65%, not above 75%, so clause (1) applies to all of it.
4. Tax: Rs. 170,000 + 30% x (Rs. 2,760,000 - Rs. 1,600,000) = Rs. 170,000 + Rs. 348,000 = Rs. 518,000.
5. His employer, working on salary only under clause (2), would deduct Rs. 6,000 + 11% x Rs. 600,000 = Rs. 72,000. The company tenant deducts tax under section 155 at the Division V rate for individuals: Rs. 15,000 + 10% x (Rs. 1,200,000 - Rs. 600,000) = Rs. 75,000.
6. Balance due with the return: Rs. 518,000 - Rs. 72,000 - Rs. 75,000 = Rs. 371,000.

What if my employer can account for the rent?

Section 149(1) tells the employer to deduct tax on estimated income under the head Salary, after “adjustment of tax withheld from employee under other heads”, on documentary evidence. That lets tax already deducted from rent be reflected in monthly payroll deductions. It does not make the employer compute tax on the rent, so any extra tax that rent creates is settled in the return.

Common mistakes

• Using the salaried table without checking the 75% test. The test uses taxable income including rent, as Case 2 shows.
• Treating tenant deduction as the whole tax on rent. Section 155 deductions are credits, not a separate final charge.
• Forgetting the section 15A allowance. The one-fifth repairs allowance and other listed deductions reduce the rent before it is added.

What to check in the official text

Read sections 9, 11, 15, 15A and 149, and Division I of Part I of the First Schedule in the source PDF, which holds both tables and the footnotes showing the Finance Act, 2026 substitution in clause (2). Section 155 rates are in Division V of Part III. Provincial property tax is outside this corpus.