Are you an investor in debt securities earning capital gains? The Federal Board of Revenue (FBR) mandates tax deduction at source (TDS) under Section 151A of the Income Tax Ordinance, 2001. Understanding these rules ensures compliance and helps you avoid penalties for tax year 2026.
💹 What Is Section 151A About?
Section 151A deals with capital gains arising from the disposal of certain debt securities, including:
• Government securities
• Corporate debt securities
• Other instruments tracked through Investor Portfolio Securities (IPS) accounts
🏦 Who Deducts the Tax?
• The custodian of debt securities or a banking company maintaining your IPS account is responsible
• At the time of disposal, the custodian must deduct tax at the rate specified in Division IIIAA of Part III of the First Schedule
• The deducted tax is deposited directly into the government treasury
❌ Exceptions
• If the debt securities are sold through a registered stock exchange and settled via NCCPL, Section 151A does not apply
🧮 How Is Capital Gain Computed?
• The capital gain on disposal of debt securities is computed following the formula provided in subsection (1A) of Section 37A of the Ordinance
• This ensures accurate determination of the taxable gain for TDS purposes
✅ Key Takeaways for Investors
• TDS is collected at source, so tax compliance is automatic
• Always maintain records of disposal and capital gains
• Check whether your transactions are exempt, especially if settled through the stock exchange and NCCPL
• Proper knowledge helps avoid overpayment or penalties
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional for guidance specific to your situation.