Islamabad, September 11, 2025 – The Federal Board of Revenue (FBR) has issued the latest version of the Income Tax Ordinance, 2001, reflecting amendments introduced through the Finance Act, 2025.
A key area of interest for taxpayers has been the treatment of “income from other sources,” a broad category that ensures all types of earnings are properly brought under the tax net.
Section 39 of the Ordinance provides clarity on what qualifies as “income from other sources.” It establishes that any income received during a tax year which does not fall under other defined heads—such as salary, business, or capital gains—shall be taxed under this category, unless specifically exempt. This provision prevents revenue leakage by capturing diverse earnings streams that might otherwise escape taxation.
The definition covers a wide range of income sources. These include dividends, royalties, profits on debt, ground rent, rent from sub-leases, or income from leasing buildings with plant and machinery. It also extends to payments for providing amenities or utilities connected with rented property, annuities, pensions, and even windfalls such as prize bond winnings, raffles, or lottery prizes. Additionally, any benefit received from the exploitation of property, whether in cash or kind, is taxable under this head.
The law also specifies that amounts received as consideration for vacating property, or gifts received from non-relatives, fall under taxable income. Even bonus shares issued to shareholders may be treated as part of this head. Importantly, the ordinance allows such income to be taxed not just in the year of receipt but, in certain cases, spread evenly over ten years, providing relief to taxpayers facing large one-time gains.
Sub-section (3) introduces strict conditions to curb tax evasion. Any amount received as a loan, advance, or deposit that is not routed through proper banking channels can be deemed taxable income. This measure enhances transparency by ensuring funds can be traced back to verifiable sources. However, exceptions exist, such as advances received for genuine sales or supply of services.
Further, the law makes special provisions for profits on National Savings Certificates or Defence Savings Certificates. If these are paid in arrears and push a taxpayer into a higher tax bracket, the individual may apply to have them taxed at the appropriate rate of the relevant earlier year. This flexibility ensures fairness in treatment of delayed incomes.
Analysts believe these detailed rules highlight the government’s intent to maximize revenue collection while maintaining equity. By taxing income from other sources, Pakistan’s tax system aims to discourage informal earnings and broaden the documented economy. Experts also note that greater awareness is needed among citizens, as many remain unclear on how different income sources are categorized and taxed.
With the new amendments, the FBR hopes to strike a balance between plugging loopholes and facilitating compliance. For taxpayers, understanding the provisions of “income from other sources” is crucial to avoid penalties and ensure accurate filing.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Taxpayers should consult qualified professionals or the Federal Board of Revenue for guidance specific to their individual circumstances.