Income Tax Ordinance, 2001 — Section 16: Non-adjustable amounts received in relation to buildings

16. Non-adjustable amounts received in relation to buildings.— (1) Where the owner of a building receives from a tenant an amount which is not adjustable against the rent payable by the tenant, the amount shall be treated as rent chargeable to tax under the head “Income from Property” in the tax year in which it was received and the following nine tax years in equal proportion.

(2)Where an amount (hereinafter referred to as the “earlier amount”) referred to in sub-section (1) is refunded by the owner to the tenant on termination of the tenancy before the expiry of ten years, no portion of the amount shall be allocated to the tax year in which it is refunded or to any subsequent tax year except as provided for in sub-section (3).

(3)Where the circumstances specified in sub-section (2) occur and the owner lets out the building or part thereof to another person (hereinafter referred to as the “succeeding tenant”) and receives from the succeeding tenant any amount (hereinafter referred to as the “succeeding amount”) which is not adjustable against the rent payable by the succeeding tenant, the succeeding amount as reduced by such portion of the earlier amount as was charged to tax shall be treated as rent chargeable to tax under the head “Income from Property” as specified in sub-section (1). 1[ ] “(7) Notwithstanding sub-section (6) of section 15, the provisions of this section shall apply to an individual or an association of persons,6[ ] who opts to pay tax at the rate specified in Division I of Part I of the First Schedule.” 1 Section 17 omitted by the Finance Act, 2006. The omitted section 17 read as follows: “17. Deductions in computing income chargeable under the head “Income from Property”.- (1) In computing the income of a person chargeable to tax under the head “Income from Property” for a tax year, a deduction shall be allowed for the following expenditures or allowances, namely:–

(a)In respect of repairs to a building, an allowance equal to one-fifth of the rent chargeable to tax in respect of the building for the year, computed before any deduction allowed under this section;

(b)any premium paid or payable by the person in the year to insure the building against the risk of damage or destruction;

(c)any local rate, tax, charge, or cess in respect of the property or the rent from the property paid or payable by the person to any local authority or government in the year, not being any tax payable under this Ordinance;

(d)any ground rent paid or payable by the person in the year in respect of the property;

(e)any profit paid or payable by the person in the year on any money borrowed including by way of mortgage, to acquire, construct, renovate, extend, or reconstruct the property;

(f)where the property has been acquired, constructed, renovated, extended, or reconstructed by the person with capital contributed by the House Building Finance Corporation or a scheduled bank under a scheme of investment in property on the basis of sharing the rent made by the Corporation or bank, the share in rent and share towards appreciation in the value of property (excluding the return of capital, if any) from the property paid or payable by the person to the said Corporation or the bank in the year under that scheme;

(fa)where the property is subject to mortgage or other capital charge, the amount of profit or interest paid on such mortgage or charge;

(g)any expenditure (not exceeding six per cent of the rent chargeable to tax in respect of the property for the year computed before any deduction allowed under this section) paid or payable by the person in the year for the purpose of collecting the rent due in respect of the property; 60 Chapter III – Tax on Taxable Income PART IV HEAD OF INCOME: INCOME FROM BUSINESS Division I Income from Business