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tax on rent
10-29-2011, 06:24 PM
Post: #1
tax on rent
assalamualaikum,
i am working as an accountant in a pvt ltd manufacturing co. our head office is located in karachi and its on rental basis.

my question is this is it necessary to have the rental agreement in co.`s name or any director can have the agreement in his own name?

my second q is this we pay rent in advance for three months (qtr.)
to landlady who is not registered to income tax. the rent is rs. 35000 per month. should we deduct tax on this payment??? if yes how the tax will be calculated?
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10-29-2011, 11:57 PM
Post: #2
 
According to s.155 of the Income Tax Ordinance, 2001
Every prescribed person making a payment... (including a payment by way of advance) to any person on account of rent of immovable property, shall deduct tax.

According to s.155(3)(iv), every company is a prescribed person.

You are bound to deduct tax. Rates of deduction of tax are given in Div V of Part III of the First Schedule to the INcome Tax Ordinance, 2001. Calculate annual rent payable. Determine the rate from Division V of Part III of First Schedule. Calculate annual tax by applying such rate. Divided the annual tax so calculated by 4. This will be the amount that you have to deduct from the rent every quarter.

It is strongly advisable that the rent agreement should be in the name of company. Otherwise it may create certain complications with respect to tenancy laws as well as tax matter.
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