The Federal Board of Revenue (FBR) has reminded investors earning capital gains on debt securities that tax deduction at source under Section 151A of the Income Tax Ordinance, 2001, is mandatory and will remain applicable for tax year 2026, making awareness of the provision essential to avoid non-compliance and penalties.
Section 151A governs capital gains arising from the disposal of specified debt securities, including government securities, corporate debt securities, and other instruments maintained through Investor Portfolio Securities (IPS) accounts. Under the law, the responsibility for deducting tax at source rests with the custodian of the debt securities or the banking company maintaining the investor’s IPS account.
At the time of disposal of such securities, the custodian is required to deduct tax at the rate prescribed in Division IIIAA of Part III of the First Schedule and deposit the deducted amount directly into the government treasury. However, transactions carried out through a registered stock exchange and settled through the National Clearing Company of Pakistan Limited (NCCPL) fall outside the scope of Section 151A.
The capital gain on disposal is computed in accordance with the formula provided under subsection (1A) of Section 37A, ensuring accurate determination of the taxable amount. Tax experts advise investors to maintain proper records of disposals and gains and verify whether their transactions qualify for exemption to ensure smooth tax compliance.
