Eighth Schedule of IT Ordinance on CGT: draft suggests filing of wealth statement for 2012

The preliminary draft of the Eighth Schedule of the Income Tax Ordinance 2001 on Capital Gains Tax (CGT) has proposed filing of wealth statement for the Tax Year 2012 by investors of stock exchanges. Sources told Business Recorder here on Saturday that the proposed section 2 of the draft Eighth Schedule of the Income Tax Ordinance 2001 deals with the source of investment.
Under the draft of the Eighth Schedule, it has been proposed to file wealth statement by the investors of stock exchanges for Tax Year 2012. The proposed Schedule has also explained the responsibility and obligation of National Clearing Company of Pakistan Limited (NCCPL). A proposed section 100B (special provision relating to capital gain tax) has also been drafted which is related to the capital gains on disposal of listed securities and tax thereon, subject to section 37A, shall be computed, determined, collected and deposited in accordance with the Rules laid down in the Eighth Schedule.
This draft of the Eighth Schedule of the Income Tax Ordinance 2001 is under discussion among tax managers, Securities and Exchange Commission of Pakistan and Ministry of Finance, sources said.
The proposed section 2 of the draft Schedule says that where a person has made any investment in the shares of a public company acquired through a registered stock exchange in Pakistan, enquiries as to the nature and source of the amount invested shall not be made for any investment made prior to the introduction of this Schedule provided that: Firstly, a statement of investments is filed with the Commissioner along with the return of income and wealth statement for tax year 2012 in the prescribed manner. Secondly, that the amount remains invested for a period of 120 days in the manner as may be prescribed.
Sources said that the where a person has made any investment in the shares of a public company acquired through a registered stock exchange in Pakistan from April 1, 2012 to June 30, 2014, enquiries as to the nature and sources of amount invested shall not be made provided that: Firstly, the amount remains invested for a period of 120 days in the manner as may be prescribed and secondly, the tax on capital gains, if any, has duly been discharged in the manner laid down in this Schedule, proposed section 2 of the draft Eighth Schedule of the Income Tax Ordinance 2001 added.
The proposed section 6 of the draft Eighth Schedule of the Income Tax Ordinance 2001 covers responsibility and obligation of NCCPL. The capital gains on disposal of listed securities, subject to tax under section 37A, and to which section 100B apply, shall be computed and determined under this Schedule and tax thereon shall be collected and deposited on behalf of taxpayers by NCCPL in the manner prescribed. The Central Depository Company of Pakistan Limited shall furnish information as required by NCCPL for discharging obligations under this Schedule. The NCCPL shall issue an annual certificate to the taxpayer on the prescribed form in respect of capital gains subject to tax under this Schedule for a financial year. Every taxpayer shall file the certificate along with the return of income. Such certificate shall be conclusive evidence in respect of the income under this Schedule. The NCCPL shall furnish to the Board within 30 days of the end of each quarter, a statement of capital gains and tax computed thereon in that quarter in the prescribed manner and format, draft of the Eighth Schedule of the Income Tax Ordinance 2001 said.
Under the draft procedure, Pakistan Revenue Automation Limited (PRAL), a company incorporated under the Companies Ordinance, 1984 or any other company or firm approved by the Board shall conduct regular system and procedural audits of NCCPL on quarterly basis for determining tax on capital gains of the respective person as determined under this Schedule. The NCCPL shall not be liable for any error, omission or mistake that has occurred from application of the system as audited by the respective entity. The NCCPL shall be empowered to refer a particular case for recovery of tax to the Board in case NCCPL is unable to recover the amount of tax.
Following is the preliminary draft of the proposed Eighth Schedule of the Income Tax Ordinance 2001:
100B Special provision relating to capital gain tax
(1) Capital gains on disposal of listed securities and tax thereon, subject to section 37A, shall be computed, determined, collected and deposited in accordance with the Rules laid down in the Eighth Schedule.
(2) Sub-section (1) shall not apply to the following persons or class of persons:
(a) a Mutual fund;
(b) a Banking Company, a non-banking finance company, and an insurance company subject to tax under the Fourth Schedule;
(c) a Modaraba;
(d) a 'Foreign Institutional Investor' being a person registered with NCCPL as a foreign institutional investor; and
(e) any person or class of persons as notified by the Board.
(3) This section shall be applicable from April 1, 2012.
EIGHTH SCHEDULE
(Section 100B)
RULES FOR THE COMPUTATION OF CAPITAL GAINS ON LISTED SECURITIES
1. Manner and basis of computation of capital gains and tax thereon
(1) Capital gains on disposal of listed securities, subject to tax under section 37A, and to which section 100B apply, shall be computed and determined under this Schedule and tax thereon shall be collected and deposited on behalf of taxpayers by NCCPL in the manner prescribed.
(2) Central Depository Company of Pakistan Limited shall furnish information as required by NCCPL for discharging obligations under this Schedule.
(3) NCCPL shall issue an annual certificate to the taxpayer on the prescribed form in respect of capital gains subject to tax under this Schedule for a financial year.
(4) Every taxpayer shall file the certificate referred to in sub-rule (3) along with the return of income. Such certificate shall be conclusive evidence in respect of the income under this Schedule.
(5) NCCPL shall furnish to the Board within 30 days of the end of each quarter, a statement of capital gains and tax computed thereon in that quarter in the prescribed manner and format.
(6) Capital gains computed under this Schedule shall be chargeable to tax at the rate applicable in Division VII of Part I of the First Schedule.
2. Sources of Investment
(1) Where a person has made any investment in the shares of a public company acquired through a registered stock exchange in Pakistan, enquiries as to the nature and source of the amount invested shall not be made for any investment made prior to the introduction of this Schedule provided that:
(a) a statement of investments is filed with the Commissioner alongwith the return of income and wealth statement for tax year 2012 in the prescribed manner; and
(b) that the amount remains invested for a period of 120 days in the manner as may be prescribed.
(2) Where a person has made any investment in the shares of a public company acquired through a registered stock exchange in Pakistan from April 1, 2012 to June 30, 2014, enquiries as to the nature and sources of amount invested shall not be made provided that:
(a) the amount remains invested for a period of 120 days in the manner as may be prescribed ; and
(b) tax on capital gains, if any, has duly been discharged in the manner laid down in this Schedule.
3. Certain provisions of the Ordinance not to apply
The respective provisions for collection and recovery of tax, advance tax and deduction of tax at source laid down in the Parts IV, V and VI of Chapter X shall not apply on the income from capital gains subject to tax under this Schedule and these provisions shall apply in the manner as laid down in the rules as prescribed by the Board, except where the recovery of tax is referred by NCCPL to the Board in terms of Rule 6(4).
4. Payment of tax collected by NCCPL to the Board
The amount collected by NCCPL, on behalf of the Board as computed in the manner laid down under this Schedule shall be deposited in a separate bank account with National Bank of Pakistan and the said amount shall be paid to the Board along with interest accrued thereon on yearly basis by July 31.
5. Persons to whom this Schedule shall not apply
If a person intends not to opt for determination and payment of tax as laid down in this Schedule, he shall file an irrevocable option to NCCPL after obtaining prior approval of the Commissioner in the manner prescribed. In such case the provisions of Rule 2 shall not apply.
6. Responsibility and obligation of NCCPL
(1) Pakistan Revenue Automation Limited (Pral), a company incorporated under the Companies Ordinance, 1984 or any other company or firm approved by the Board or any authority appointed under section 209 of the Ordinance, not below the level of an Additional Commissioner Inland Revenue, shall conduct regular system and procedural audits of NCCPL on quarterly basis for determining tax on capital gains of the respective person as determined under this Schedule.
(2) NCCPL shall not be liable for any error, omission or mistake that has occurred from application of the system as audited by the respective entity.
(3) NCCPL shall be empowered to refer a particular case for recovery of tax to the Board in case NCCPL is unable to recover the amount of tax.
7. Transitional Provisions In respect of tax year 2012, for the period April 1 to June 30, 2012, the certificate issued by NCCPL under Rule 1(3) shall be the basis of capital gains and tax thereon for that period, initial draft of the proposed law added.