Income Tax, as provided under the Income Tax Ordinance of 2001 of Pakistan, is a tax chargeable on the incomes of individuals, companies, and other concerns. This tax is chargeable on all incomes, and elaborate provisions are contained in the ordinance that concerns the assessment, collection, and enforcement of the income tax.

Heads of Income:

The Income Tax Ordinance, 2001 categorizes income into five distinct heads, each covering different types of income. These heads are as follows:

1. Salary (Section 12)
   • Salary head covers every income of a taxpayer that arises to him as an employee. It includes the basic salary, bonuses, allowances, benefits, or considerations of any other kind. These shall automatically be covered under this head if those are acquired by someone from an employer in return for the services performed by them or at their request.
2. Income from Property (Section 15)
   • Income on this head consists of rent received or receivable by any person in respect of the property or land or building owned by him. Deduction for certain expenses of the property may be allowed to be deducted under certain specific conditions, like repairs, interest on loans and so on.
3. Income from Business (Section 18)
   • This head includes profits and gains arising from business or profession that taxpayers are involved in. It will cover the income that is a result of trading, commerce, manufacturing, provision of services, and any other activity regarded as form of business.
4. Capital Gains (Section 37)
   • Capital gain refers to the profit or gain from the sale or transfer of capital assets such as those of property, shares, or securities. Ordinarily, tax is imposed on the difference between the amount of its sale and the cost it was acquired for.
5. Income from Other Sources (Section 39)
   • This is a residual head that includes any income not covered under the other heads. Examples include dividends, interest, royalties, winnings from lotteries, or any other income that does not fall under the other specific categories.

Key Points:

• Assessment Year: The year following the income year in which the income is assessed and taxed.
• Taxable Income: The income calculated after applying exemptions, deductions, and allowances as per the provisions of the ordinance.
• Filing of Returns: Taxpayers are required to file income tax returns annually, declaring their income under the relevant heads.

The Income Tax Ordinance, 2001 provides the legal framework for the computation and collection of income tax in Pakistan, and taxpayers must comply with the rules and regulations stipulated within it.