Provisio added in Rule 13N of Income Tax Rules, 2002 to provide for mechanism for determinig / rectifying date of acquisition of securities.

GOVERNMENT OF PAKISTAN
REVENUE DIVISION
FEDERAL BOARD OF REVENUE

Islamabad, the 8th March, 2016.

NOTIFICATION
(Income Tax)

S.R.O. 194(I)/2016.- The following draft of certain further amendments in the Income Tax Rules, 2002, which the Federal Board of Revenue proposes to make in exercise of the powers conferred by sub-section (1) of section 237 of the Income Tax Ordinance, 2001 (XLIX of 2001), is hereby published for the information of all persons likely to be affected thereby, as required by sub-section (3) of said section and notice is hereby given that the draft will be taken into consideration by the Federal Board of Revenue after seven days of its publication in the official Gazette.

Any objection or suggestion, which may be received from any person, in respect of the said draft, before the expiry of the aforesaid period, shall be considered by the Federal Board of Revenue.

DRAFT AMENDMENTS

In the aforesaid Rules,-

(1) in rule 13N,-

(a) in sub-rule (3), for full stop at the end, a colon shall be substituted and thereafter the following proviso shall be added, namely:-

"Provided that in case error is pointed out or found in recording the date of acquisition of security, NCCPL may with the prior approval of the Commissioner Inland Revenue rectify such date based on written confirmation received from CDC evidencing the accurate date of acquisition of security and accordingly re-compute the capital gain tax liability in the financial year in which such security has been disposed."; and

(b) in sub-rule (23), in clause (d), the word "and" at the end shall be omitted and thereafter the following new clause shall be inserted, namely:-

"(dd) 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; and"; and

(2) in rule 13P, after clause (za), the following new clause shall be added, namely:-

"(zb) Sales transactions of securities of unlisted company after its conversion into listed company:-

(i) Detail of the transaction

An investor, holding such securities, sells 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 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. Capital Gain shall be chargeable to tax as per section 37A read with rates specified in Division VII of Part I of the First Schedule.

(iii) Example

(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 1st January, 2013 at Rs. 15 per share when the Company was private/public unlisted company and transfers the same electronic form with CDC on 1st 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 1st 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.

(c) NCCPL can compute capital gain and tax thereon, if any, based on original acquisition date of security in the case the actual date of acquisiotion is available with CDS, in the following manner:-

[F.No.4(90)ITP/2007-PT-I]

(QAZI HIFZUR REHMAN)
Secretary (IT-Budget)