Written by Hamza Shahnawaz in Taxation Section 37A sets out the tax treatment of securities, including capital gain calculations, eligible losses, holding periods and covered financial instruments. ISLAMABAD: The Federal Board of Revenue (FBR) has explained the rules governing capital gains arising from the disposal of securities for Tax Year 2027 under Section 37A of the Income Tax Ordinance, 2001. The provisions are contained in the Income Tax Ordinance, 2001, updated up to June 30, 2026, and specify the securities subject to capital gains tax, the method for calculating gains and the treatment of losses. Securities subject to capital gains tax Under Section 37A(1), capital gains arising from the disposal of securities on or after July 1, 2010 are chargeable to tax at the rates specified in Division VII of Part I of the First Schedule, unless the gain is exempt under the Income Tax Ordinance, 2001. The section does not apply to a banking company or an insurance company. Certain share disposals are also excluded from Section 37A. These include: • Shares of a listed company disposed of otherwise than through a registered stock exchange and not settled through the National Clearing Company of Pakistan Limited (NCCPL). • Shares disposed of through an initial public offering (IPO) during the listing process, except where details of the disposal are furnished to NCCPL for the computation of capital gains and tax. For such transactions, the provisions of Section 37 apply. How capital gain is calculated Under Section 37A(1A), the capital gain on the disposal of a security is calculated using the following formula: Capital gain = A – B Here: • A represents the consideration received by the person on disposal of the security. • B represents the cost of acquisition of the security. The resulting gain is subject to the applicable capital gains tax rate under Division VII of Part I of the First Schedule. Holding period of securities For the purposes of Section 37A, the holding period is calculated from the date of acquisition to the date of disposal. The provision applies to securities acquired before, on or after June 30, 2010, provided that the disposal takes…