Does a pensioner with rent or other income have to pay quarterly advance tax under section 147?

What does the law say?

Section 147(1) of the Income Tax Ordinance, 2001 makes every taxpayer “whose income was charged to tax for the latest tax year” liable to pay advance tax for the year, other than on three kinds of income:

• (b) income chargeable to tax under sections 5, 6 and 7;
• (c) “income subject to deduction of tax at source under section 149”, which is the salary section;
• (d) income from which tax was collected or deducted and “for which no tax credit is allowed as a result of sub-section (3) of section 168”, which in plain words is income whose withholding is a final tax.

Section 147(2) then says the section “does not apply to an individual where the individual’s latest assessed taxable income excluding income referred to in clauses (b), (c) and (d) of sub-section (1) is less than one million rupees”.

So for a retiree the test has two steps. Take the latest assessed taxable income. Remove the excluded income. If what is left is below one million rupees, section 147 does not apply.

Where does the pension fit?

Pension is salary under section 12(2)(f). Section 149(1) requires tax deduction from salary, and section 149(1A) deals with pension specifically: the payer deducts tax where a former employee below seventy receives pension that exceeds ten million rupees in the year, and only on the part above that figure. Section 12(2A)(i) charges pension as a final tax at the pension table rates (for tax year 2027, 0% up to ten million rupees and 5% above it).

Pension therefore falls within clause (c), at least where section 149 applies to it. The text does not say in so many words whether a pension below ten million rupees, from which section 149(1A) requires no deduction, is still “income subject to deduction of tax at source under section 149”. That point matters only for someone whose other income sits just under one million rupees; see the variation below.

Where does rent fit?

Rent is chargeable under the head “Income from Property” by section 15(1). It is not in any of the three exclusions:

• A footnote to section 147 records that clause (ba), “income chargeable to tax under section 15”, was omitted by the Finance Act, 2013.
• A footnote to section 155 records that its sub-section (2), which made tax deducted from rent “a final tax on the income from property”, was omitted by the Finance Act, 2010.
• Section 155 is not in the list in section 168(3) of final taxes that get no credit.

Rent counts towards the one million rupee test, and tax deducted from it by a tenant is a credit, not a final tax. Section 155(3) lists the tenants who must deduct: governments, companies, non-profit organisations, certain businesses such as private schools and clinics, and individuals or associations paying gross rent of one and a half million rupees and above in a year.

How is the quarterly amount worked out?

Section 147(4B) applies to an individual whose latest assessed income is one million rupees or more as determined under sub-section (2). Each quarter’s instalment is (A / 4) - B, where:

• A is the tax assessed for the latest tax year; and
• B is tax paid in the quarter for which credit is allowed under section 168, other than tax deducted under section 149.

Section 147(8) gives a tax credit for the instalments against the year’s tax. Section 147(7) treats an unpaid instalment as tax due under an assessment order.

Worked example (illustrative figures)

Mr. Javed, 67, Lahore. A retired bank officer with pension of Rs. 1,500,000 a year. He lets the upper floor of his house to a family for Rs. 120,000 a month (Rs. 1,440,000 a year). The tenant is an individual paying less than Rs. 1,500,000 a year, so is not a prescribed person under section 155(3) and deducts nothing.

1. Suppose his latest assessment, for tax year 2026, shows taxable income from property of Rs. 1,150,000 and tax assessed of Rs. 60,000. (Both are illustrative, not computed on this page.)
2. Excluded income: the pension, under clause (c). What remains is Rs. 1,150,000.
3. Rs. 1,150,000 is not less than one million rupees, so section 147(2) does not switch the section off.
4. Quarterly instalment: A / 4 = Rs. 60,000 / 4 = Rs. 15,000. B = Rs. 0, because no tax was deducted from the rent.
5. Instalment: Rs. 15,000 - Rs. 0 = Rs. 15,000 each on 15 September 2026, 15 December 2026, 15 March 2027 and 15 June 2027, a total of Rs. 60,000, credited against his tax year 2027 tax.

If his assessed property income had been Rs. 950,000, step 3 would give the opposite answer: below one million rupees, so no advance tax under section 147.

What if my other income is just under one million rupees?

Suppose assessed rent income is Rs. 900,000 and pension is Rs. 1,200,000. If the pension is excluded under clause (c), Rs. 900,000 is below the threshold and section 147 does not apply. If a 0% pension below ten million rupees were not treated as income subject to section 149, the total could cross one million rupees. The text does not settle this, and this page does not resolve it.

What about profit on bank deposits?

Clause (b) of section 147(1) names only the income charged under sections 5, 6 and 7. Tax on profit on debt received by individuals is imposed by a separate charging provision that clause (b) does not list. How that income is treated for the one million rupee test is not covered here.

Common mistakes

• Counting the pension towards the threshold. Clause (c) removes income subject to section 149.
• Treating rent tax as final. The final-tax rule in section 155 was omitted in 2010, so rent counts and tax deducted from it is a credit.
• Using this year’s income. Section 147(2) looks at the latest assessed taxable income, not the current year’s.
• Missing the 15th. Individuals pay by the 15th of September, December, March and June under section 147(5).

What to check in the official text

Read section 147 in full, including sub-sections (1), (2), (4B), (5), (6) and (6B), and the footnotes recording omitted clause (ba). Read section 149(1) and (1A), section 12(2)(f) and (2A), section 155(3) for which tenants must deduct, and section 168(3) for the final taxes that get no credit. The rate a tenant deducts is in Division V of Part III of the First Schedule; read it in the official PDF, since our site copy leaves out tables.