Are House Rent and Conveyance Allowances Taxable in Pakistan?
The short answer
Yes. For salaried employees in Pakistan, house rent allowance and conveyance allowance are fully taxable. They are added to your gross salary and taxed at your normal slab rate. Many employees assume allowances are tax-free and are caught off guard, so it helps to be clear on this for tax year 2026-27.
Why most allowances are taxable
Under the Income Tax Ordinance 2001, salary is defined broadly to include almost every cash payment an employer makes to an employee. Unless a specific exemption is written into the law (as it is for medical allowance under Clause 139), an allowance is part of taxable salary. House rent, conveyance, utilities, mobile and similar cash allowances all fall into the fully taxable category, and the Finance Act 2026 does not change this.
| Allowance | Taxable? |
|---|---|
| House rent allowance | Fully taxable |
| Conveyance allowance | Fully taxable |
| Utilities allowance | Fully taxable |
| Medical allowance | Exempt up to 10% of basic (Clause 139) |
A worked example
Ahmed has a basic salary of Rs 1,000,000, a house rent allowance of Rs 450,000 and a conveyance allowance of Rs 120,000. All three are added together, so his taxable salary from these heads is Rs 1,570,000. The house rent and conveyance amounts do not reduce his tax in any way; they simply increase taxable income.
What about a company-provided house or car?
If your employer provides accommodation or a vehicle directly instead of paying a cash allowance, the perquisite rules apply. A prescribed value of that benefit is added to your taxable income instead of the cash figure. A cash allowance and a benefit in kind are treated differently, so how the package is written matters.
Planning around taxable allowances
House rent and conveyance give no exemption, so make sure you are also using the heads that really are exempt, medical allowance and a recognised provident fund, instead of loading up the taxable allowances. We cover this in our salary structuring guide.
How Zaffre HRM gets it right
Zaffre HRM, part of the Zaffre Axon platform, classifies every pay head correctly. House rent and conveyance are marked as fully taxable, medical allowance is exempted up to its cap, and slab tax is worked out on the total. Allowance taxability is set up once on Zaffreaxon, so your payslips treat each allowance the same way every month and a taxable head never gets exempted by mistake.
References: Income Tax Ordinance 2001 (salary and perquisite provisions, Clause 139); Finance Act 2026 (Federal Budget 2026-27); FBR.
Accurate allowance taxation
Book a demo with Zaffre Tech to see how Zaffre HRM taxes house rent, conveyance and every other allowance correctly.