The Federal Board of Revenue (FBR) has issued updated guidelines for the taxation of speculation business in Pakistan for the tax year 2025-26.
These updates have been incorporated into the revised Income Tax Ordinance, 2001, following amendments introduced through the Finance Act, 2025.
What is Speculation Business?
Under Section 19 of the Income Tax Ordinance, a speculation business is defined as a business where contracts for the purchase and sale of commodities—including stocks and shares—are settled without the actual delivery or transfer of those commodities. Instead, settlements are made periodically or at the end of a contract, usually involving price differences rather than physical goods.
However, not every contract involving future price changes is considered speculation. The law excludes:
• Contracts for raw materials or merchandise entered to hedge against price fluctuations in a regular manufacturing or trading business.
• Contracts involving stocks or shares made by dealers or investors to protect themselves from losses due to price movements.
• Contracts by members of forward markets or stock exchanges conducted as part of legitimate arbitrage or hedging practices.
Key Tax Principles
1. Separate Treatment – Speculation business must be treated as a distinct and separate activity from any other business carried out by a taxpayer.
2. Income Assessment – Tax on such activity is calculated under the head “Income from Business,” but separately from income earned through other operations.
3. Loss Handling – Any losses arising from speculation business during a tax year must be computed under the relevant provisions and adjusted according to Section 58 of the Ordinance.
Disclaimer: This article is for informational purposes only. Tax laws are subject to revisions, and individuals or businesses should consult official FBR notifications or a qualified tax advisor for accurate compliance guidance.