Income Tax Rules, 2002

CHAPTER-II

DETERMINATION OF INCOME HEADS OF INCOME PART-III: COMPUTATION OF CAPITAL GAIN ON DISPOSAL OF SECURITIES UNDER SECTION 37A OF THE INCOME TAX ORDINANCE, 2001

From: 2023-11-01 - To: 0000-00-00 13P. Clarifications and explanations.- Clarification and explanation as mentioned in sub-rule (21) of rule 13N regarding computation of capital gains and tax payable thereon under the Eighth Schedule to the Ordinance, and the amount and period of investment referred to in rule 2 of the said Eighth Schedule are as under:- (a) Sales transactions:- (i) Details of the transaction An investor, holding securities, sells such securities in a stock exchange. The transaction is settled by transferring the securities sold from his account maintained in Central Depository System to the investor(s) buying the securities with credit of sale proceeds to the account of investor disposing of the securities. (ii) Tax treatment Disposal of security is to be taken as taxable event, at settlement date. Capital gain will be computed by applying FIFO method. If the securities holding period is more than one year, then no CGT shall be collected, otherwise, as per holding period, CGT shall be collected as per the holding period. (iii) Example A, being a client of a broker, has 2,000 shares of company ABC in his account. He acquired 1,000 shares on the 1st January, 2011 at Rs.15 per share, 500 on the 1st July, 2012 at Rs.16 per share and 500 on the 1st January, 2012 at Rs.14 per share. He disposed off 500 shares on the 1st February, 2012 at Rs.13 per share, 500 shares on the 7th February, 2012 at Rs.14 per share, 500 shares on the 21st February, 2012 at Rs.15 per share and 500 shares on the 28th February, 2012 at Rs.22 per share. The cost of acquisition is deemed to include 0.50% of the acquisition cost as incidental expenses incurred. NCCPL shall collect CGT as per following example 1[(below rates are hypothetical and used solely for understanding purposes, therefore, rate as per Division VII of Part I of First Schedule will be applicable in case of actual transactions)]: Purchases / Acquisitions Disposal Date No. of shares Price Cost* 1st Feb, 2012 7th Feb, 2012 21st Feb, 2012 28th Feb, 2012 Total 1-Jan-11 1,000 15 15,000 500 500 1000 1-Jan-11 50 16 8,000 500 500 1-Jan-12 500 14 7,000 500 500 2,000 30,000 500 500 500 500 500 Selling price per share…