Is Unity capable of location based dame? For instance, head shots?
In a nutshell, yes.
You’re going to want to have different colliders for each of the separate zones that you want to include in your damage model. Then, when you shoot your gun, or what-have you, your raycast or OnCollisionEnter implementation is going to take into account which object it is hitting and deal damage and other effects appropriately from there.
There are multiple ways you can go about doing this, but we’ll need more specifics to make it work.