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Capital Gain Tax (CGT)
COMPUTATION, DETERMINATION, COLLECTION & DEPOSIT OF CAPITAL GAIN TAX ("CGT")
National Clearing Company of Pakistan Limited (“NCCPL”), an infrastructure institution of Pakistan’s capital market, has been mandated by the Federal Board of Revenue (“FBR”) to compute, determine, collect and deposit CGT on disposal of listed securities. NCCPL has developed an automated CGT system to discharge its role in the CGT regime implemented under Section 37A of the Income Tax Ordinance, 2001.
NCCPL’s CGT system not only facilitate investors in discharging their CGT obligation and tax assessment but also serves FBR by providing a uniform CGT computation and centralized collection mechanism. The CGT system has continuously enhanced tax collection and has resulted in documentation of economic activity in the capital markets.
- All trades/transactions executed on Securities Exchange trading platforms and movement of securities through free-delivery in Central Depositary System (“CDS”) is covered under CGT Regime.
- All capital gains arising on redemption of units of open ended mutual funds and on trading of future commodity contacts at Pakistan Mercantile Exchange (“PMEX”) are included in CGT Regime of NCCPL, from July 1, 2016.
- Loss sustained on disposal of listed securities in tax year 2019 and onwards that has not been set off against the gain of the person from disposal of securities chargeable to tax under section 37A shall be carried forward to the following tax year and set off only against the gain of the person from disposal of securities chargeable to tax under section 37A, but no such loss shall be carried forward to more than three tax years immediately succeeding the tax year for which the loss was first computed.
The adjustment of prior year’s capital losses is subject to availability of the tax payers’ name in the Active Tax Payers List provided by FBR to NCCPL for the purpose of allowing such adjustments.
- NCCPL collects CGT on monthly basis on the basis of net capital gain of tax payers in CGT regime through respective securities brokers which is deposited in the designated account opened and operated exclusively for this purpose.
- NCCPL also refunds excess or entire amount of CGT collected on monthly basis to respective securities brokers if the tax payer sustains losses resulting in reducing capital gain or when net loss situation arises during a tax year.
- NCCPL submits quarterly return to FBR in the prescribed form which contains details of capital gain, CGT computation and collection in respect of all tax payers in the CGT regime.
- NCCPL issues Annual Certificate of Capital Gains to tax payers which is considered conclusive evidence of capital gain and tax thereon.
CGT rates on capital gains arising on disposal of listed securities traded at Pakistan Stock Exchange, redemption of units of open ended mutual funds and trading of future commodity contracts at PMEX are as under:
|Market||Period||Year 2022-23 CGT Rates|
|Investors appearing in ATL||Investors not appearing in ATL|
|PSX||Where the security is acquired on or before June 30, 2022||12.5%||25.0%|
|Where the security is acquired on or after July 1, 2022:|
|Where the holding period does not exceed one year||15.0%||30.0%|
|Where the holding period exceeds one year but does not exceed two years||12.5%||25.0%|
|Where the holding period exceeds two years but does not exceed three years||10.0%||20.0%|
|Where the holding period exceeds three years but does not exceed four years||7.50%||15.0%|
|Where the holding period exceeds four years but does not exceed five years||5.00%||10.0%|
|Where the holding period exceeds five years but does not exceed six years||2.50%||5.00%|
|Where the holding period exceeds six years||0.00%||0.00%|
|PMEX||Future commodity contracts entered into by members of Pakistan Mercantile Exchange||5.00%||10.0%|
|For individual, association of persons and company - if dividend receipts of the fund are more than capital gains||10.0%||20.0%|
|For individual, association of persons and company - if dividend receipts of the fund are less than capital gains||12.5%||25.0%|
|For individual and association of persons||10.0%||20.0%|
|Where the holding period of security is more than six years||0.00%||0.00%|
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