Which tenants must deduct tax from my rent, and at what rate (section 155)?

Some tenants in Pakistan are legally required to keep back part of the rent and pay it to the government in the landlord’s name. The rule is section 155 of the Income Tax Ordinance, 2001. The rates below are from the Ordinance as amended to 30 June 2026 and apply to payments in tax year 2027 (1 July 2026 to 30 June 2027).

What does the law say?

Section 155(1) says every prescribed person paying rent of immovable property, in full or part and including an advance, “shall deduct tax from the gross amount of rent paid at the rate specified in Division V of Part III of the First Schedule”. Rent here includes rent of furniture and fixtures and amounts for services relating to the property. The Explanations add that gross rent includes certain non-adjustable amounts received from the tenant, and that the deduction applies “irrespective of head of income”.

Which tenants are prescribed persons?

Section 155(3) lists them:

Clause	Prescribed person
(i)	The Federal Government
(ii)	A Provincial Government
(iii)	A Local Government
(iv)	A company
(v)	A non-profit organization or a charitable institution
(vi)	A diplomatic mission of a foreign state
(via)	A private educational institution, a boutique, a beauty parlour, a hospital, a clinic or a maternity home
(vib)	Individuals or associations of persons paying gross rent of rupees one and a half million and above in a year
(vii)	Any other person notified by the Board

A family paying Rs. 100,000 a month (Rs. 1.2 million a year) for a house is not on this list. The same family paying Rs. 150,000 a month (Rs. 1.8 million a year) falls under clause (vib). Notifications under clause (vii) are not held in this corpus.

What rates apply for tax year 2027?

The rate depends on who the landlord is. Clause (a) of Division V covers individual and association of persons landlords:

Gross amount of rent	Tax to be deducted
Up to Rs. 300,000	Nil
Rs. 300,001 to Rs. 600,000	5% of the gross amount above Rs. 300,000
Rs. 600,001 to Rs. 2,000,000	Rs. 15,000 + 10% of the gross amount above Rs. 600,000
Above Rs. 2,000,000	Rs. 155,000 + 25% of the gross amount above Rs. 2,000,000

Clause (b) says the rate for a company landlord “shall be 15% of the gross amount of rent”. The individual table was substituted by the Finance Act, 2021. Division V does not say in its own words whether the bands are measured per payment or per year. The example below works on the rent for the year; confirm the method for part payments against the official text and any rules or circulars, which are not in this corpus.

What if the landlord is not on the active taxpayers’ list?

Section 100BA applies the Tenth Schedule to persons not appearing in the active taxpayers’ list. Rule 1 of that Schedule says the rate of deduction “shall be increased by hundred percent”, which doubles it. Rule 10 lists deductions the Schedule does not apply to. Section 155 was removed from that list by the Finance Act, 2021, so the increase now applies to rent. Rule 2 sets a separate procedure where the tenant is satisfied that the landlord was not required to file a return: before deducting, the tenant gives the Commissioner a written notice, and the Commissioner decides within thirty days.

Worked example (illustrative figures)

Individual landlord, school tenant. Naveed owns a building in Peshawar let to a private school for Rs. 150,000 a month.

1. Gross rent for the year: Rs. 1,800,000.
2. Band: above Rs. 600,000 but not above Rs. 2,000,000.
3. Deduction: Rs. 15,000 + 10% x (Rs. 1,800,000 - Rs. 600,000) = Rs. 15,000 + Rs. 120,000 = Rs. 135,000 for the year.
4. If Naveed is not on the active taxpayers’ list, the rate is increased by one hundred percent: Rs. 270,000.

Company landlord, bank tenant. A property company in Multan lets a floor to a bank for Rs. 300,000 a month.

1. Gross rent for the year: Rs. 3,600,000.
2. Deduction at 15%: Rs. 540,000. If the company is not on the active taxpayers’ list, 30%: Rs. 1,080,000.

What happens to the tax deducted?

Section 168(2) says the person from whom tax was deducted “shall be allowed a tax credit for that tax” against tax on taxable income for the year of deduction. Section 155 is not among the final taxes listed in section 168(3). The old final-tax rule in section 155(2) was omitted by the Finance Act, 2010. The related page on whether rent withholding is final tax shows the reconciliation.

Common mistakes

• Assuming every tenant deducts. Only the persons in section 155(3) must deduct. An ordinary household paying under Rs. 1.5 million a year does not.
• Applying the 15% company rate to an individual landlord. Individuals and associations of persons use the slab scale in clause (a).
• Using the pre-2021 table. The Nil band was Rs. 200,000 and the rates ran to 35% before the Finance Act, 2021 substituted the table.
• Treating the deduction as the landlord’s full tax. It is a credit, not a final tax.

What to check in the official text

Read section 155, Division V of Part III of the First Schedule in the source PDF, section 100BA and rules 1, 2 and 10 of the Tenth Schedule, and section 168. Board notifications adding prescribed persons under section 155(3)(vii) are outside this corpus. Provincial sales tax on renting of property, where a province charges it, is also outside this corpus.