Holding period enhanced to 24 months on capital gain on disposal of securities in order to charge tax at zero percent

KARACHI: The Finance Bill 2014 has revised the income tax on capital gain on disposal of securities as it enhanced the holding period to 24 months from 12 months for the purpose to charge at zero percent.
According to the economic overview on budget 2014/2015, the Finance Bill proposes the following amendments: it is explained in proposal that the tax rates where holding period is less than 24 months are proposed to be revised as follows for tax year 2015: if the holding period is less than 12 months then it would be taxed at 12.5 percent; if holding period is between 12-24 months would be charged at 10 percent; and if holding period is 24 months or more would be charged at zero percent.
In current scenario, capital gain on disposal of securities, other than gain exempt under this ordinance, is governed under the provisions of section 37A. First Schedule provided varying tax rates applicable for tax year 2011 to 2015 depending upon the holding period. Further, capital gain arising on securities held for more than one year is not chargeable to tax under this section.
Further, the provisions of section 37A have been extended to “debt securities” which has been defined to mean: (a) Corporate debt securities such as Term Finance Certificate, Sukuk Certificates (Shariah Compliant Bonds), Registered Bonds, Commercial Papers, Participation Term Certificates and all kinds of debt instruments issued by any Pakistani or foreign company or corporation registered in Pakistan; and (b) Government Debt Securities such as Treasury Bills, Federal Investment Bonds, Pakistan Investment Bonds, Foreign Currency Bonds, Government papers, Municipal Bonds, Infrastructure Bonds and all kinds of debt instruments issued by Federal Government, Provincial Government, Local Authorities and any other statutory bodies.

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