KARACHI: Finance Bill 2025 has proposed revised capital gains tax (CGT) rates on the sale of securities, set to take effect from July 1, 2024.

Under the current regime, CGT on the sale of securities is based on the holding period, with a maximum rate of 15% and an exemption for holding periods exceeding six years, the FBR said.

The new regulations overhaul this system for securities acquired on or after July 1, 2024:

For Filers: A flat CGT rate of 15% will apply to the sale of all securities, regardless of the holding period.

For Non-Filers: CGT will be taxed at normal rates, with a minimum rate of 15% and a maximum rate of 45%.

Mutual Funds and Collective Investment Schemes

The FBR has also revised CGT rates on income from mutual funds and collective investment schemes:

The capital gains income from these sources will see an increase from the current 10% to 15%.

The changes are designed to simplify the taxation process and ensure a fair contribution from all investors:

Revenue Generation: By implementing a flat rate for filers and a progressive rate for non-filers, the government aims to boost tax revenues.

Encouraging Compliance: The differential rates between filers and non-filers are intended to incentivize timely tax filing and compliance.

Equity and Fairness: The revisions seek to align the tax rates more closely with the principle of equity, ensuring that those who earn more from securities pay their fair share.

These changes will have significant implications for investors in the stock market and other securities:

Increased Tax Burden: Investors, particularly non-filers, will face higher tax liabilities, which could affect their net returns.

Incentive to File Taxes: The higher rates for non-filers serve as a strong incentive for investors to file their tax returns promptly to benefit from the lower flat rate.