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. This is a common surprise for employees who assume allowances are tax-free, so it is worth understanding clearly 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 instead of a cash allowance your employer provides accommodation or a vehicle directly, the rules on perquisites apply, and a prescribed value of that benefit is added to your taxable income rather than the cash figure. The treatment differs between a cash allowance and a benefit in kind, so it matters how the package is framed.
Planning around taxable allowances
Since house rent and conveyance offer no exemption, the smart move is to ensure you are also using the genuinely exempt heads, medical allowance and a recognised provident fund, rather than over-loading 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 flagged as fully taxable, medical allowance is exempted up to its cap, and the correct slab tax is computed on the total. Because allowance taxability is configured centrally on Zaffreaxon, your payslips treat each allowance the same way every month, with no risk of accidentally exempting a taxable head.
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.