Finance Act 2022 notifies tax rates on disposal of securities

KARACHI: Through the Finance Act, 2022 the tax rates on disposal of securities have been notified for tax year 2023 and onwards.

According to interpretation of PwC A. F. Ferguson & Co. gain on disposal of listed securities (that was previously chargeable to tax at 12.5 per cent irrespective of the holding period) shall now be subject to revised tax rates based on holding period. The revised rates in terms of section 37A of Income Tax Ordinance, 2001 are as under:

For holding period less than 1 year: the tax rate shall be 15 per cent.

For holding period from 1 year to 2 years: the tax rate shall be 12.5 per cent.

For holding period from 2 years to 3 years: the tax rate shall be 10 per cent.

For holding period from 3 years to 4 years: the tax rate shall be 7.5 per cent.

For holding period from 4 years to 5 years: the tax rate shall be 5 per cent.

For holding period from 5 years to 6 years: the tax rate shall be 2.5 per cent.

For holding period more than 6 years: the tax rate shall be zero per cent.

For securities (other than future commodity contracts entered into by members of Pakistan Mercantile Exchange):

(i) the above-referred revised rates shall apply on disposal of securities acquired on or after July 1, 2022; and

(ii) rate of 12.5 per cent shall apply on disposal of those securities which were acquired on or before June 30, 2022 irrespective of holding period.

Previously, in respect of Mutual Fund or Collective Investment Scheme or a REIT scheme, no capital gains tax was deductible if the holding period of the security was more than 4 years.

Through Finance Act, 2022, such holding period has now been increased to 6 years.