5 Major Heads of income in Pakistan

1. HEADS OF INCOME
A person may earn and receive income from
different sources during the tax year .For the purpose
of charge of income tax and calculation of tax
payable , the income is classified under five heads.
These heads of income have been specified in section
11 of the income Tax Ordinance ,2001, and are as
follows ;
a) Salary.
b) Income from house property.
c) Income from business or profession.
d) Capital gains.
e) Income from other sources.

2. EXPLANATION
Each and every income earned by the person can be
classified in one of
These heads. The presence of the fifth head that is “income
from other
Sources “ makes it sure that any income which cannot be
included in any of
The first four heads must be taxed under this general
heads .

3. SALARY
This is the first head or source of income mentioned in
section 11 of the income tax Ordinance , 2001. For proper
understanding it is necessary to distinguish the income
from salary and income under over heads .
OR
“A salary is a form of payment from an
employer to an employee, Which may be specified in an
employment contract . It is constructed with piece wages ,
where each job, hour or other unit is paid separately, rather
than on a periodic basis….. In accounting salaries are
recorded in payroll accounts.

4. INCOME FROM PROPERTY
Property income refers to profits or income received by
virtue of owing property . The three forms of property
income are rent , received from the ownership of natural
resources interest received by virtue of owing financial
assets and non profit received from ownership of capital
equipment.

5. INCOME FROM BUSINESS OR PROFESSION
According to the internal revenue service, business
income may include income received from the sale of
products or services.
For example,
Fees received by a person from the regular practice of a
profession are income from business.

6. CAPITAL GAINS
Section 11 of the income tax Ordinance ,2001, provides that
capital gains is the forth source of income for a person and
is chargeable to tax under this head, other than a gain
which is exempt from tax .
Explanation
It means any gain arising from the disposal of capital
asset. Such as income shall be chargeable under the head
“capital gain and shall be deemed to be the income of that
year in which disposal took place.

7. INCOME FROM OTHER SOURCES
Section 39 of the income tax ordinance 2001 deals with the fifth
and last head of income of a person ,I.E “ income from other
sources “ and any income received from other sources is chargeable
to tax under this head , other than income which is exempt from
tax .
Examples of income from other sources:
1.Dividend
2.Royalty
3.Profit on debt
4.Ground rent
5.Rent from sub- lease rent.

8. Thank You