Income from other sources under tax ordinance

Income from other sources under tax ordinance

Islamabad – The Federal Board of Revenue (FBR) has clarified the taxation framework for miscellaneous income sources through Section 39 of the Income Tax Ordinance, 2001.

The Income Tax Ordinance has been updated up to June 30, 2021, incorporating amendments introduced by the Finance Act, 2021.

Key Provisions of Section 39:

1. Scope of Income from Other Sources:

• Section 39(1) outlines that any income of every kind received by a person in a tax year, not included in any other head, excluding income exempt from tax, shall be chargeable to tax under the head “Income from Other Sources.” This includes various sources such as dividends, royalties, profits on debt, ground rent, rent from sub-leases, and income from the lease of buildings with plant or machinery, among others.

2. Treatment of Gifts:

• Section 39(1a) clarifies that any amount or fair market value of any property received without consideration or as a gift, other than gifts received from relatives as defined in sub-section (5) of section 85, is chargeable to tax under this head.

3. Taxation of Certain Payments:

• Section 39(2) stipulates that if a person receives an amount referred to in clause (k) (amount received for vacating possession of a building), the amount shall be chargeable to tax under the head “Income from Other Sources” in the year of receipt and the following nine years in equal proportion.

4. Treatment of Loans and Advances:

• Section 39(3) states that any amount received as a loan, advance, deposit for the issuance of shares, or gift in a tax year, not through a banking channel, shall be treated as income chargeable to tax under the head “Income from Other Sources.”

5. Exception for Advance Payments:

• Section 39(4) exempts advance payments for the sale of goods or supply of services from the provisions of sub-section (3).

6. Profit on Debt Election:

• Section 39(4A) allows individuals receiving profit on debt from National Savings Deposit Certificates to elect for taxation at the rate applicable in the tax year to which the profit relates, rather than the year in which it is received.

7. Limitations:

• Section 39(5) clarifies that this section does not apply to income chargeable to tax under any other head or subject to tax under specified sections.

Disclaimer: The provided text is for informational purposes only. While efforts are made to provide accurate information, the team at PkRevenue.com is not responsible for any errors or omissions.

This section ensures a comprehensive approach to taxation, capturing income from various sources not covered by specific heads, promoting transparency and clarity in the taxation of miscellaneous income.