Posted in Know How

Taxable Rental Income

The taxable rental incomes of a taxpayer for tax year is the grass amount of income derived by the tax payer  from the rental of  A building for the year reduced   by the total amount of deductions allowed to the tax payer for the year.

Rental of a building for a tax year shall including the following

All amounts derived by the tax payer during by the year under the lease agreement ,including lease premium or similar amount;

All payment mode by the lease during the year on behalf of the lease on according to  the lease agreement ;

The amount of any bond, security; any similar amount that, during  the year, the tax payer is entitled to retain as result of damage to the building and that has not been used by the tax payer in repairing the damage to building;

The value of any renovation or improvement made under the lease agreement to the building when the cost was borne by the lease in addition to the rent payable to the tax payer.

1. The rate of rental income tax applicable to a body is 30%

2. The rates of rental income tax applicable to an individual are:-

Taxable income from rental of Buildings (per year)

Income Tax payable (in %)


Deduction (in Birr)



To Birr



Exempt threshold






















Over 130,800




Example: - If Mr. Abebe rented his building Month 1 thousand 5 hundered   birr he will get 18 thousand (18,000)annually, so

His income fall in the   2nd Row or the schedule Taxable Income (Annual Income percent of the rate of profit)

Taxable Income= 18,000x50%

Taxable Income   =9,000

Annual Tax= (9,000x10%)-720

Annual Tax = 180:- this is working only for estimated Tax pale (which is not accountable to have accounting book) shall differ across the regions. 

Deductable expenditures

In computing the taxable rental income for a tax year of taxpayers who does not maintain books of account, a deduction shall be allowed for the following amounts;

Any fees and charges but not tax levied by state or city administration in respect of the land on bulling leased and paid by the tax payer during the year

An amount equal fifty  present (50%) of the gross rental income derived  by the tax payer for the year as on allowance for the repair ,maintenance and depreciation of the building, furniture , and equipment

The above mentioned fifty percent (50%) shall not be applicable for taxpayer who are required to maintain  book of accounts

In computing the taxable rental income for a tax year of a tax payer who maintains books of account, a deduction shall be a load  for any expenditures to the extent  necessarily in cored by the tax pear  in deriving rental income and paid during the year including :

The cost of the lease of  land on which  the building is situated

Repairs and maintenance ;

Depreciation of the building  furniture and equipment

Interest  and  insurance premiums ;and

Fees and charges, by not tax, laved by state or city administration in respect of the land or building leased.


The taxable rental income of sub-lesser of building for a tax year shall be the different between the total rental income received by the sub-lesser during the year and the total rental income paid  to the lesser of building plus other expensive to the extent necessarily incurred by the sub lesser to generate the income.

The owner of building who allows a lessee to sub-lease the building shall be liable for the rental income tax payable by the lessee if the lessee fails to pay the tax.

New rental building notification

At the earlier of the time construction of a rental building is completed or when the building is rented, the owner   of building and the builder shall notify the Keble administration or local administration in which the building is located about the completion and the name, a address, and TIN of the person liable for rental income tax with respect to the building.

The Keble administration or local administration shall communicate the information contained in the notification.

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