The capital gain tax 2023 on the sale of securities is described in Section 37-A of the Income Tax Ordinance 2001. Such gain is calculated as under:-
Capital Gain = Sale proceeds of the security – Cost of acquisition of such security
The rates of capital gain tax are applied by the holding period of the security which is from the date of acquisition of a security to the date of disposal or sale of such security.
The term ‘security’ for the purpose of section 37-A includes the following:-
I. Share of a public limited company
ii. Vouchers of Pakistan Telecommunication Corporation
iii.Modaraba certificates
iv. Redeemable capital instruments
v. Debt Securities
vi. Unit of exchange-traded fund
vii. Derivative products including future contracts entered into by the members of Pakistan Mercantile Exchange whether settled by physical delivery or otherwise.
Debt securities as mentioned in ‘v’ above include the following:-
i.Corporate Debt Securities such as Term Finance Certificates (TFCs)
ii. Sukuk Certificates (Sharia Compliant Bonds)
iii. Registered Bonds
iv. Commercial papers
v. Participation Term Certificates (PTCs) and all other kinds of debt instruments issued by a Pakistani or a Foreign Company or Corporation registered in Pakistan.
vi. Government Debt Securities such as Treasury Bills (T-Bills)
vii. Federal Investment Bonds (FIBs)
viii. Pakistan Investment Bonds (PIBs)
ix. Foreign Currency Bonds
x. Government Papers
xi. Municipal Bonds
xii. Infrastructure Bonds and all kinds of debt instruments issued by Federal Governments, Provincial Governments, Local Authorities, and other Statutory bodies.
The capital gain on the sale of securities is treated as a separate block of income for the purpose of taxation. If a person suffers from a loss on the sale of securities during a tax year, such loss can only be set off against the gain from the sale of any other security and no loss can be carried forward to the subsequent tax year. A provision to this is given in the Ordinance that from the tax year 2019 onwards, such loss can be carried forward up to the next three years succeeding the year in which the loss originally occurred.
The rates of tax on capital gain from the sale of securities for the tax year 2023 are as under:-
| Sr No | Holding Period of Security | Rate of Tax |
|---|---|---|
| 1 | Less than one year | 15% |
| 2 | Exceed one year and up to two years | 12.5% |
| 3 | Exceeds two years and up to three years | 10% |
| 4 | Exceeds three years and up to four years | 7.5% |
| 5 | Exceeds four years and up to five years | 5% |
| 6 | Exceed five years and up to six years | 2.5% |
| 7 | Exceeds six years | 0% |
| 8 | Future commodity contracts entered into by members of Pakistan Mercantile Exchange | 5% |
Related Posts
Business Income Tax in Pakistan 2022
Salary Income Tax in Pakistan 2022
Salary Income Tax Rates for Tax Year 2024
Federal Board of Revenue (FBR)
Disclaimer
“The contents of this post are intended for informational and educational purposes only and are based on data gathered by Team Fiscal Updates. It is important to note that the information provided here should not be relied upon as a reference for any legal documents. If you require assistance with legal decisions, it is recommended to seek proper professional advice. It may also be noted that the provisions of the Income Tax Ordinance 2001 have an overriding effect on all other laws of the country and shall prevail in case of any contradiction in terms of Section 3 of the Ordinance”