How to Reduce Tax on Rental Income in Pakistan

How to Reduce Tax on Rental Income in Pakistan

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Taxpayers can reduce taxes on rental income at the time of filing tax-returns. Property owners can deduct legitimate expenses from rental income, thereby reducing taxable rental income and rental tax liability. Here are some key deductible expenses:

Building Repairs and Maintenance: Claim up to 20% of your annual rent for repairs that keep your property in good condition.

Insurance Premiums: Protect your investment and deduct premiums paid to insure the building against unforeseen events.

Local Taxes and Charges: Local rates, property taxes, and cess all qualify as deductible expenses.

Ground Rent (Leasehold Properties): If you lease the land your property sits on, read more deduct the annual ground rent paid to the landowner.

Loan Interest: Deduct the interest paid on loans used for acquiring, constructing, renovating, or expanding your rental property.

Management and Collection Expenses: Reimbursement for professional property management and rent collection is allowed up to 4% of the annual rent.

Legal Expenses: Protect your ownership rights by deducting legal fees incurred for defending your property title or resolving property-related lawsuits.

Irrecoverable Rent (Under Specific Conditions): If you have tenants who default on rent, and you've made a bona fide effort to collect, the unpaid rent can be deducted under specific circumstances.

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