FBR opposes exemption on source of investment and CGT collection by NCCPL – Alfalah Securities Limited

Karachi: As reported in a local news paper, the Federal Board of Revenue (FBR) holds strong reservations over the proposed regime of capital gains tax (CGT) to the Ministry of Finance on the exemption from section 111 of the Income Tax Ordinance 2001 to investment made in stock market up to June 30, 2014 and declaring National Clearing Company of Pakistan (NCCPL) as a withholding agent to deduct and deposit the CGT from investors.

According Alfalah Securities Limited, FBR is not in favor of giving a blanket exemption from disclosing the source of investments made in future by investors at the stock exchanges. Moreover, FBR has opposed the proposal of declaring NCCPL as a withholding agent to deduct and deposit CGT from the stock market investors and would analyze the systems of NCCPL before giving its final proposal on declaring it as a withholding agent. In this regard, officials of the Inland Revenue Service have scheduled a visit on Monday (February 13) to study the systems of NCCPL related to the collection of CGT. It has been planned that NCCPL would provide investor-wise monthly report of CGT deducted and deposited for each investor to FBR and issue a certificate to the investor of the amount deducted. The investor will file tax return, including the CGT deposited based on the certificate provided by NCCPL. However, it is yet to be seen whether the FBR would be convinced with the collection mechanism devised by NCCPL and whether there would be a blanket exemption on revealing the source of equity investment or there would be some constraints on the exemptions. Alfalah Securities Limited believes that the NCCPL would manage to get a go-ahead from the FBR on CGT collection after making few amendments in its after consulting with the FBR, which would be taken positively by the market participants.