Tax rates for capital gains on securities
Tax rates for capital gains on securities: Finance Act, 2024 — Explanation regarding Important Amendments made in the Income Tax Ordinance, 2001
Important amendments made in Income Tax Ordinance, 2001 (“the Ordinance”) through Finance Act, 2024 are explained in the subsequent paragraphs.
Tax rates for capital gains on securities
Prior to the Finance Act, 2024, capital gain on disposal of securities was taxed at different rates on the basis of holding period.
For the securities acquired on or after the first day of July, 2022 the rate of capital gains on disposal was 15% where the holding period does not exceed one year and the rate was progressively lower on the basis of holding period and the same was to be zero where the holding period was beyond six years.
For the securities acquired on or after the first day of July, 2013 but on or before the thirtieth day of June, 2022, the rate was 12.5%. The rate was zero where securities were acquired before the first day of July, 2013.
Finance Act, 2024 has not brought any change in tax rates on capital gains on disposal of securities which were acquired prior to the first day of July, 2024. The rate on disposal of securities remains 12.5% for securities acquired between
01.07.2013 to 30.06.2022 (both dates inclusive). The rate on disposal is zero where security was acquired prior to 01.07.2013. For securities acquired from 01.07.2022 to 30.06.2024, the rate of capital gains on disposal remains the same on the basis of holding period i.e., 15% where holding period is less than one year, 12.5% where holding period exceeds one year but does not exceed two years, 10% where holding period exceeds two years but does not exceed three years, 7.5% where holding period exceeds three years but does not exceed four years, 5% where holding period exceeds four years but does not exceed five years, 2.5% where holding period exceeds five years but does not exceed six years and 0% where the holding period exceeds six years.
Finance Act, 2024 has amended the rate of tax to be paid under section 37A on disposal of securities acquired on or after the 1″ July, 2024.
The rate of tax on capital gain on disposal of such securities is 15% irrespective of the holding period for persons who were present on the ATL on the date of acquisition as well as on the date of disposal of securities. For individuals and AOPs who were not on the ATL on the date of acquisition and on the date of disposal of securities, the rate shall be as provided in Division I, Part I of the First Schedule provided that such rate shall not be less than 15% in any case.
For companies not on ATL on the date of acquisition and date of disposal, the rate shall be as provided in Division II of Part I of the First Schedule which is 29%.
The rate of deduction of capital gains by a mutual fund or a collective investment scheme or a REIT scheme on redemption of securities for individuals and AOPs for stock funds and other funds was 10% and the same has been increased to 15%.
Similarly, the 10% rate for stock fund for a company has also been increased to 15%. In the case of a stock fund where dividend receipts of the fund were less than capital gains, the rate of tax deduction was 12.5% which has now been increased to 15%.
Read full text of Explanation of Finance Act, 2024 Amendments made in the Income Tax Ordinance, 2001 for more updates on taxes from FBR click here.
