Karachi, September 1, 2025 – The Federal Board of Revenue (FBR) has released updated guidelines to help taxpayers understand how their business income will be calculated for the tax year 2025-26. These guidelines are part of the revised Income Tax Ordinance, 2001, which now includes amendments from the Finance Act, 2025.
What is Business Income?
According to Section 18 of the Income Tax Ordinance, business income refers to any earnings that come from operating a trade, profession, or any commercial activity. It also includes various forms of financial gains linked to business activities. The key types of income that fall under this category include:
1. Profits from business operations – Any money earned by running a trade, company, or professional practice during the year is considered business income.
2. Earnings from associations and clubs – Professional or trade associations and cooperative societies, including recreational clubs, must also pay tax on income generated from selling goods, property, or services to their members.
3. Income from leasing assets – If a person or company earns money by leasing or hiring out movable property, that amount will be considered part of their business income.
4. Perks and benefits from business dealings – Any benefit, whether it can be converted into cash or not, gained from a business relationship (past, present, or future) will be taxable. This includes cases where debts are waived or profits on debts are written off.
5. Management fees – Companies, including modaraba management companies, must include management fees in their taxable business income.
Banking and Financial Institutions
The law also covers income generated by banks, leasing companies, development finance institutions, and investment banks. Any amount paid to them in connection with leased assets or mutual fund distributions will be treated as taxable business income.
Why It Matters for Taxpayers
The updated law ensures clarity, especially for those earning from multiple sources. By grouping these earnings under “Income from Business,” the FBR aims to simplify compliance and avoid confusion between different income heads like “Other Sources.”
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Quick Reference Guide – What Counts as Business Income?
| Category | Example |
| Business Operations | Profits from running a shop, factory, or consultancy |
| Associations/Clubs | Income from selling services or property to members |
| Leasing of Assets | Money from hiring out machinery or vehicles |
| Business Benefits | Waiver of debt or other perks gained from deals |
| Management Fees | Fees charged by management companies |
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Disclaimer: This article is for informational purposes only. Tax laws may change, and individuals or businesses should consult the official FBR guidelines or a tax advisor for accurate calculations.