Banks required to cut WHT from capital gains: FBR

SOHAIL SARFRAZ

ISLAMABAD: Banks having Foreign Currency Value Accounts (FCVAs), Foreign Currency Business Value Accounts (FCBVAs), Non-Resident Rupee Value Accounts (NRVAs) or Non-Resident Rupee Business Value Accounts (NRBVAs) are required to deduct withholding tax from capital gain arising on the disposal of debt instruments and government securities/certificates invested though these accounts.

In this regard, the FBR has issued an income tax circular number 2 of 2026 on the Capital Gains-Computation and Withholdings.

In section 100B, the reference to “a non-banking finance company” in clause (b) of subsection (2) has been omitted along with omission of clauses (c) and (d) of that subsection to extend the application of special provisions namely section 37A read with rules contained in the Eighth Schedule in respect of capital gains arising from the disposal of securities by a non-banking finance company, a modaraba and to a company only in respect of debt securities.

The FBR clarified that a new provision has been introduced in the form of addition of sub-section (3) in section l00B to provide that in the cases of a mutual fund, a banking company and an insurance company, the NCCPL shall compute and determine the capital gain as per the mechanism prescribed under section 37A, while such entities shall continue to deposit tax on the amount of capital gain as per the applicable provisions of the Ordinance.

Sub-section (lDA) of section 152 has been substituted. Now every banking company maintaining a Foreign Currency Value Account (FCVA), Foreign Currency Business Value Account (FCBVA), Non-Resident Rupee Value Account (NRVA) or Non-Resident Rupee Business Value Account (NRBVA) is required to deduct tax from capital gain arising on the disposal of debt instruments, government securities and certificates (including their Shariah-compliant variants) invested though such accounts, at the rate specified in Division II of Part III of the First Schedule, FBR added.

About the reduced rates, the FBR has highlighted that the clause (79) has been substituted to broaden its scope. Now profit on debt derived from a rupee account held with a scheduled bank in Pakistan shall be exempt from tax in the case of a person who maintains a Non-Resident Rupee Value Account or Non-Resident Business Value Account under the scheme introduced by the State Bank of Pakistan.

Clause (99C) has been introduced in Part I of the Second Schedule to provide exemption to the income of a Private Equity and Venture Capital Fund registered under the Private Funds Regulations, 2015. if not less than ninety percent of its accounting income (as reduced by accumulated losses and unrealized capital gains) is distributed to its unit or certificate holders or shareholders, subject to the specified condition.

In Part II of the Second Schedule amendments made in clause (5AA) provides that the rate of tax to be deducted from a profit on debt under section 152 shall be 10 percent in the case of any person if the profit on debt has been derived from a debt instrument issued by the federal government under Public Debt Act, 1944 and purchased exclusively through a bank account maintained abroad a non-resident rupee account repatriable (NRAR), foreign currency value account (FCVA), foreign currency business value account (FCBVA), non-resident rupee value account (NRVA) or non-resident rupee business value account (NRBVA) maintained with a banking company in Pakistan.

Amendments made in clause (24D) of said Part II reduces the rate of minimum tax under sub-section (1) of section 113 to 0.5 percent in cases of distributors, dealers, sub-dealers and wholesalers of the goods specified in the said clause subject to the condition that the beneficiaries appear on the active taxpayers’ lists issued under the Sales Tax Act 1990 and the Ordinance, the FBR added.