Proposed amendment withdraws tax exclusion and subjects non-ATL investors to significantly higher tax on securities transactions
ISLAMABAD: The Finance Bill 2026 has proposed a significant increase in the tax burden on stock market investors who are not listed on the Active Taxpayers List (ATL), reinforcing the government’s strategy to encourage tax compliance and documentation.
Under the proposed amendment to the Income Tax Ordinance 2001, the tax collected on capital gains from the disposal of securities under Section 37A will effectively be doubled for investors who do not appear on the ATL.
Withdrawal of existing tax exclusion
The proposal seeks to omit sub-rule (y) of Rule 10 of the Tenth Schedule to the Income Tax Ordinance.
The provision was originally introduced through the Finance Act 2024 after progressive tax rates for non-filers were imposed on gains arising from the disposal of securities. Those rates carried a minimum tax of 15 per cent and varied according to the applicable tax slabs contained in Division I of Part I of the First Schedule.
Sub-rule (y) excluded tax collected under Section 37A from the application of the Tenth Schedule.
Subsequently, the Finance Act 2025 amended the provision and restricted the exclusion to securities acquired on or after July 1, 2025.
The Finance Bill 2026 now proposes to remove the exclusion altogether.
Tax burden to rise for non-ATL investors
Tax experts say that the proposed omission will result in a 100 per cent increase in the tax collected under Section 37A for persons who are not included on the Active Taxpayers List.
The move is expected to widen the tax differential between compliant taxpayers and non-filers, making ATL status increasingly important for investors participating in Pakistan’s capital markets.
Authorities believe the measure will encourage more investors to file tax returns and maintain active taxpayer status to avoid higher tax costs on securities transactions.
Part of broader compliance drive
The proposal forms part of a broader package of tax measures included in the Finance Bill 2026 aimed at strengthening compliance, expanding the documented economy and increasing revenue collection.
Recent budget proposals have also included higher penalties for late tax return filing, increased costs for ATL restoration and stricter tax treatment for non-filers across various sectors of the economy.
The government has consistently sought to use tax policy to incentivise taxpayers to join and remain on the Active Taxpayers List.
Impact on capital market participants
Market participants are closely reviewing the proposed changes, as the higher tax burden could affect investment decisions for individuals and entities that have not fulfilled their tax filing obligations.
Tax advisers note that investors who maintain ATL status will continue to benefit from lower tax rates compared with non-filers, preserving the government’s policy of rewarding tax compliance.
If approved by Parliament, the amendment will further strengthen the distinction between active taxpayers and non-filers, while increasing the cost of investing in the stock market without being part of the documented tax system.
