PERSON 01: TAXABILITY OF INCOME FROM OTHER SOURCES:

Income that doesn't fall in any other head is assumed to be an income from other sources e.g.
dividends, royalty income, interest income from savings deposits, lottery, gambling income,
gifts at certain possession time.( based on recipts )

It includes;

1. Dividends income;

If shares are held for the purpose of investment the dividend received is the income from other
sources. However, if shares are held for trading purposes the income is said to be the income
from business. if the amount receiving exceeds RS 5000 the tax is deducted at source at 10%
rate. Normal tax rate for dividend income is 7.5 % but if the business is claiming exemptions,
then the rate is 25%. Rates will increase for a resident non active taxpayer.

2. Profit on debt

It is the income or gain generated by investing in debt instruments/ securities like bonds, loans
or other fixed income securities. The profit can be in the form of interest, capital gains,
premiums and discounts etc. If the profit from debt exceeds Rs 5000,000 the rate is 15%. I.e.
government bonds, CDs. It arises from passive investments in debt instruments

Interest income is taxed according to individual slab rates, in the case of savings deposits if it
exceeds Rs 10,000 per year and fixed deposits if it exceeds Rs 40,000 per year. (sukuk holder
and rates).

3. Rental income:

It is property owned by individuals and includes:

 Ground rent, in which the owner of the land and building are different, one person
constructs buildings on another person's land and the rent received by the owner of
land is called ground rent. It is exempt from income from property and is computed in
income from other sources
 Rental income received from sub-leasing of the plant, land or building
  Rental income received from letting out the plant, furniture or machinery along with the
building.
4. Royalty income:

Granting the use of intellectual property like copyrights, patents and trademarks etc. Royalty is
a passive income. Income generated such as licensing fees, royalties and sale is said to be an
income from other sources. Royalty income is taxed at 15% for both residents and non-
residents of Pakistan and in case of offshore digital services taxed at 5%.

5. Income from gifts or lottery:

Income from gift is chargeable to tax if it is not received by grandparents, parents, brother,
spouse, sister, son or daughter. However, if the gift is received from these relations but not
subject to banking channels are still chargeable to tax. Similarly, for lottery and prizes. The tax
rate for prize bond is 15% and for raffle, lottery, gambling, prizes by company is 20%.

6. Family pension:

Pension received by a family member of a pensioner who dies before retirement falls under
income from other sources. As per the regulations 50% of the pension will be shifted to the
family member. Family members include sons, daughters or widows. Only one family member
is allowed to receive the pension of a deceased government servant. The taxable amount is
determined by the member’s relation with deceased and pension rules.

7. Insurance Commission or brokerage income:

The income that is directly or indirectly earned by entities or individuals who act between two
parties. They are brokers, dealers, agents, intermediaries and generate income by sale purchase
of securities, insurance policies, real estate etc on behalf of clients. They are taxed at the rate of
12%.

Deductions:

1. Any person receiving profit on debt shall be allowed a deduction for zakat on his income
under Zakat and Usher Ordinance.
 2. Rent, rates, repairs and depreciation of machinery, land or building is also tax exempted.
For a person who places an eligible depreciable asset into service in Pakistan for the first
time is allowed a deduction in initial allowance.
3. The rental income is chargeable to tax under income from other sources however, any
other expenditure on property or plant is exempted.
4. The standard deduction on family pension is Rs 15000 or 1/3 of pension whichever is
lower.
5. Profit earned by a non-resident person from a security issued by a resident person is
also exempted.
6. Any amount paid as commission or remuneration to any other person or a banker.
7. Interest income has a deduction of Rs 10000.
8. Family pensin is fully exempted for armed forces or if death occurs before retirement.

Subleasing = other income

Ground rent more than 99 years long term lease receiptsss

Receuipts of profit on debt isother source for individual

For bank it is business income