ITO Section 15A | Deductions in computing income chargeable under the head “Income from Property"

ITO Section 15A

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;
• (g) where the property is subject to mortgage or other capital charge, the amount of profit or interest paid on such mortgage or charge; 
• [(h) any expenditure, not exceeding 6 [four] 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 wholly and exclusively for the purpose of deriving rent chargeable to tax under the head, “Income from Property” including administration and collection charges;”]
• (i) any expenditure paid or payable by the [person] in the tax year for legal services acquired to defend the [persons]’s title to the property or any suit connected with the property in a court; and
• (j) where there are reasonable grounds for believing that any unpaid rent in respect of the property is irrecoverable, an allowance equal to the unpaid rent

where—

• (i) the tenancy was bona fide, the defaulting tenant has vacated the property or steps have been taken to compel the tenant to vacate the property and the defaulting tenant is not in occupation of any other property of the [person];
• (ii) the  [persons] has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or has reasonable grounds to believe that legal proceedings would be useless; and
• (iii) the unpaid rent has been included in the income of the  [persons] chargeable to tax under the head “Income from Property” for the tax year in which the rent was due and tax has been duly paid on such income.

(2) Where any unpaid rent allowed as a deduction under clause (j) of sub-section (1) is wholly or partly recovered, the amount recovered shall be chargeable to tax in the tax year in which it is recovered.

(3) Where a person has been allowed a deduction for any expenditure incurred in deriving rent chargeable to tax under the head “Income from Property” and the person has not paid the liability or a part of the liability to which the deduction relates within three years of the end of the tax year in which the deduction was allowed, the unpaid amount of the liability shall be chargeable to tax under the head “Income from Property” in the first tax year following the end of the three years.

(4) Where an unpaid liability is chargeable to tax as a result of the application of sub-section (3) and the person subsequently pays the liability or a part of the liability, the person shall be allowed a deduction for the amount paid in the tax year in which the payment is made.

(5) Any expenditure allowed to a person under this section as a deduction shall not be allowed as a deduction in computing the income of the person chargeable to tax under any other head of income.

(6) The provisions of section 21 shall apply in determining the deductions allowed to a person under this section in the same manner as they apply in determining the deductions allowed in computing the income of a person chargeable to tax under the head “Income from Business”.]