Islamabad, August 3, 2025 – Banks across Pakistan have started collecting withholding tax on the sale of debt securities from Investor Portfolio Securities (IPS) accounts, following new changes introduced in the Finance Act, 2025.
According to the Federal Board of Revenue (FBR), capital gains earned from selling debt securities over a bank’s counter were previously not subject to any automatic tax deduction. In many cases, sellers would declare such gains in their annual tax returns, but this led to loss of revenue and limited compliance.
To fix this issue, the FBR has now made it mandatory for banks, as custodians of IPS accounts, to act as withholding agents. This means banks must now deduct 15% advance tax on capital gains when a customer sells debt securities and then deposit this amount directly into the government treasury.
Capital gains will be calculated as the difference between the purchase price (cost of acquisition) and the price at which the debt securities are sold.
This step is part of the FBR’s efforts to improve tax collection and close loopholes that were allowing untaxed profits. By involving banks in the tax collection process, authorities hope to strengthen monitoring of investment transactions and ensure that all taxable income is properly reported and taxed.