KARACHI: The Federal Board of Revenue (FBR) has proposed draft of certain further amendments to add provision in Rule 13N of Income Tax Rules, 2002 to provide for mechanism for determining/rectifying date of acquisition of securities through S.R.O. NZ/ (1)12016.
The FBR propose that in case an error is pointed out or found in recording the date of acquisition of security, National Clearing Company Limited (NCCL) may with the prior approval of the Commissioner Inland Revenue rectify such date based on written confirmation received from Central Depository Company (CDC) evidencing the accurate date of acquisition of security and accordingly re-compute the Capital Gain Tax (CGT) liability in the financial year in which such security has been disposed”.
Moreover, where securities of unlisted company are converted into electronic form, the cost of acquisition of such securities shall be the market price at which the security is listed on the stock exchange and the date of acquisition shall be the date of acquisition as available with CDC.”
FBR has also proposed the procedure of determining sales transactions of securities of unlisted company after its conversion into listed company.
If an investor, holding such securities, sells securities in a stock exchange and the transaction is settled by transferring the securities sold from his account maintained in Central Depository System to the investor buying the securities with credit of sale proceeds to the account of investor disposing of the securities.
Disposal of security is to be taken as taxable event, at settlement date. Capital gain will be computed by applying first in first out (FIFO) method for the calculation of Capital Gain.
FBR elaborates the provision with an example saying that (a) A, being a client of a broker. has 1,000 shares of company ABC in his account. He acquired 1,000 shares on the 1 “January, 2013 at Rs. 15 per share when the Company was private/public unlisted company and transfers the same electronic form with CDC on 1” February, 2013.
ABC Company listed on stock exchange on 1St July, 2015 at a listing price of Rs. 20. He disposed off 500 shares on 13t January, 2016 at Rs. 25 per share and 500 shares on 8th February, 2017at Rs. 30 per share. (b) Since NCCPL can obtain information only from CDC and stock exchanges in accordance with sub-rule 3 and 23 of rule 13N, NCCPL will compute holding period as available with CDC and at the acquisition price at which the security is listed on stock exchange.
NCCL can compute capital gain and tax thereon, if any, based on original acquisition date of security in the case the actual date of acquisition is available with CDC.