Written by Hamza Shahnawaz in Definitions, Taxation Updated tax rules define speculative transactions involving commodities, stocks and shares while excluding qualifying hedging activities ISLAMABAD: The Federal Board of Revenue (FBR) has outlined the rules governing “speculation business” for tax year 2027, including the circumstances in which transactions involving commodities, stocks and shares are treated as speculative activities for tax purposes. The FBR issued the Income Tax Ordinance, 2001, updated up to June 30, 2026, explaining the treatment of speculation business under Section 19. Under the law, where a person carries on a speculation business, it is treated as a distinct and separate business from any other business conducted by that person. The provisions relating to business income and losses are applied separately to the speculation business and the taxpayer’s other business activities. The law also provides that any loss arising from speculation business during a tax year, calculated in accordance with the relevant provisions, will be dealt with under Section 58 of the Income Tax Ordinance. What constitutes speculation business? For tax purposes, the FBR defines “speculation business” as a business in which a contract for the purchase or sale of a commodity, including stocks and shares, is periodically or ultimately settled without actual delivery or transfer of the commodity. However, the law excludes certain transactions from the definition of speculation business. The first exclusion applies to contracts involving raw materials or merchandise entered into by a person in the course of manufacturing or mercantile business. Such contracts are excluded where they are intended to protect against losses arising from future…