Income Tax Ordinance, 2001 — Section 39: Income from other sources

39. Income from other sources. — (1) Income of every kind received by a person in a tax year, 1[if it is not included in any other head,] other than income exempt from tax under this Ordinance, shall be chargeable to tax in that year under the head “Income from Other Sources”, including the following namely:

(a)2[Dividend;]

(b)3[royalty;]

(c)profit on debt; 4[(cc) additional payment on delayed refund under any tax law;]

(d)ground rent;

(e)rent from the sub-lease of land or a building;

(f)income from the lease of any building together with plant or machinery; 5[(fa) income from provision of amenities, utilities or any other service connected with renting of building;]

(g)any annuity or pension;

(h)any prize bond, or winnings from a raffle, lottery6[, prize on winning a quiz, prize offered by companies for promotion of sale] or cross-word puzzle;

(i)any other amount received as consideration for the provision, use or exploitation of property, including from the grant of a right to explore for, or exploit, natural resources; 1 Inserted by the Finance Act, 2002 2 The word “Dividends” substituted by the Finance Act, 2002 3 The word “royalties” substituted by the Finance Act, 2002 4 Inserted by the Finance Act, 2012. 5 Inserted by the Finance Act, 2003. 6 Inserted by the Finance Act, 2003. 95 Chapter III – Tax on Taxable Income

(j)the fair market value of any benefit, whether convertible to money or not, received in connection with the provision, use or exploitation of property; 1[ ]

(k)any amount received by a person as consideration for vacating the possession of a building or part thereof, reduced by any amount paid by the person to acquire possession of such building or part thereof; 2[ ] 3[(l) any amount received by a person from Approved Income Payment Plan or Approved Annuity Plan under Voluntary Pension System Rules, 20054[; 5[ ] ] 6[(Ia) subject to sub-section (3), any amount or fair market value of any property received without consideration or received as gift, other than gift received from 7[relative as defined in sub-section (5) of section 85] ] 8[; and] 9[(lb) income arising to the shareholder of a company, from the issuance of bonus shares;] 10[ 11[ ] ]

(2)Where a person receives an amount referred to in clause (k) of sub section (1), the amount shall be chargeable to tax under the head “Income from Other Sources” in the tax year in which it was received and the following nine tax years in equal proportion.

(3)Subject to sub-section (4), any amount received as a loan, advance, deposit 12[for issuance of shares] or gift by a person in 13[a tax year] from another person (not being a banking company or financial institution) otherwise than by a Chapter III – Tax on Taxable Income crossed cheque drawn on a bank or through a banking channel 1[or through digital means as defined in section 2] from a person holding a National Tax Number 2[ ] shall be treated as income chargeable to tax under the head “Income from Other Sources” for the tax year in which it was received.

(4)Sub-section (3) shall not apply to an advance payment for the sale of goods or supply of services. 3[(4A) Where

(a)any profit on debt derived from investment in National Savings Deposit Certificates including Defence Savings Certificate paid to a person in arrears or the amount received includes profit chargeable to tax in the tax year or years preceding the tax year in which it is received; and

(b)as a result the person is chargeable at higher rate of tax than would have been applicable if the profit had been paid to the person in the tax year to which it relates, the person may, by notice in writing to the Commissioner, elect for the profit to be taxed at the rate of tax that would have been applicable if the profit had been paid to the person in the tax year to which it relates.] 4[(4B) An election under sub-section (4A) shall be made by the due date for furnishing the person’s return of income for the tax year in which the amount was received or by such later date as the Commissioner may allow by an order in writing.]

(5)This section shall not apply to any income received by a person in a tax year that is chargeable to tax under any other head of income or subject to tax under section 5[5, 5AA, 6, 7 or 7B]. 6[ ] 40. Deductions in computing income chargeable under the head “Income from Other Sources”.— (1) Subject to this Ordinance, in computing the income of a person chargeable to tax under the head “Income from Other Sources” for a tax year, a deduction shall be allowed for any expenditure paid by the person in 1 The expression inserted by the Finance Act, 2025. 2 The word “Card” omitted by the Finance Act, 2006. 3 Inserted by the Finance Act, 2003. 4 Inserted by the Finance Act, 2003. 5 The expression “5, 6 or 7” substituted by the Finance Act, 2021. 6 Sub-section (6) omitted by the Finance Act, 2002. The omitted sub-section (6) read as follows: “(6) Expenditure is of a capital nature if it has a normal useful life of more than one year.” 97 Chapter III – Tax on Taxable Income the year to the extent to which the expenditure is paid in deriving income chargeable to tax under that head, other than expenditure of a capital nature.

(2)A person receiving any profit on debt chargeable to tax under the head “Income from Other Sources” shall be allowed a deduction for any Zakat paid by the person 1[ ] under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), at the time the profit is paid to the person.

(3)A person receiving income referred to in clause 2[ ] (f) of sub-section

(1)of section 39 chargeable to tax under the head “Income from Other Sources” shall be allowed

(a)a deduction for the depreciation of any plant, machinery or building used to derive that income in accordance with section 22; and

(b)an initial allowance for any plant or machinery used to derive that income in accordance with section 23.

(4)No deduction shall be allowed to a person under this section to the extent that the expenditure is deductible in computing the income of the person under another head of income.

(5)The provisions of section 21 shall apply in determining the deductions allowed to a person under this section in the same manner as they apply in determining the deductions allowed in computing the income of the person chargeable to tax under the head "Income from Business". Chapter III – Tax on Taxable Income PART VII EXEMPTIONS AND TAX CONCESSIONS