Income From Business Chapter- 09
PARTICULARS
(a) the profits and gains of any business carried on at any time in the year;
(b) Income derived from the members by any trade, professional or similar association from the sale
of goods or rendering of services;Explanation. – For the removal of doubt, it is clarified that income derived by co-operative societies
from the sale of goods, immoveable property or provision of services to its members is and has
always been chargeable to tax under the provisions of this Ordinance;
(c) any income from the hire or lease of tangible movable property;
(d) the fair market value of any benefit or perquisite derived by a person due to any past, present,
or prospective business relationship; and
Explanation: The word ‘benefit’ includes any benefit derived by way of waiver of profit on debt or
the debt itself under the State Bank of Pakistan, Banking Policy Department, Circular No.29 of
2002 or in any other scheme issued by the State Bank of Pakistan.
(e) any management fee derived by a management company.
Explanation — For the removal of doubt it is clarified that income subject to taxation under separate
block of income and final tax regime shall not be chargeable to tax under this section.Profit on debt [U/s 18(2)]Where the business of a person is to earn such profit then such profit shall be taxed under the head
business and not under the head "Income from Other Sources".
Lease amount [U/s 18(3)]Where a lessor being as a scheduled bank or an investment bank or a development finance
institution or a modaraba or a leasing company has leased out any asset (in the ownership of
lessor or not) to a lessee then such amount received in connection to lease arrangement shall be
treated as business income of the lessor.Dividend income from Mutual Funds [U/s 18(3)]
Any amount received by a banking company or a non-banking finance company from distribution
by a mutual fund or a Private Equity and Venture Capital Fund out of its income from profit on debt
shall be treated as business income and not as income from other sources.- Speculation business [U/s 19]
Speculation Business is considered separate from Non Speculation Business. The profits and gains
arising from the speculation business for a tax year shall be included in the person’s income
chargeable to tax under the head "income from business". However u/s 58 the loss arising from
speculation business carried on by the person shall be set off only against the income of the
person from any other speculation business of the person chargeable to tax for that year, hence
the same is treated as separate and distinct from any other business carried on by the person."Speculation business" means any business in which a contract for the purchase and sale of any
commodity (including stocks and shares) is made otherwise than by the actual delivery or transfer
of the commodity but does not include contracts to guard against future loss in price of goods
manufactured for sale or actual delivery, holding of stocks and shares or contract to guard
against loss that may arise due to forward market or stock exchange related to jobbing and
arbitrage are not included in speculation business.- Deductions in computing income chargeable under the head income from business [U/s 20]
4.1. Expenditure incurred wholly and exclusively for business [U/s 20(1)]
A person shall be allowed deduction in respect of expenditures incurred wholly and exclusively for
business that are covered under the main profit and loss heads i.e. cost of sales, administrative and
selling expenses.4.2 Use of animals for business [U/s 20(1A)]