CGT on investors of stock exchanges: New IT Schedule through Presidential Ordinance on the cards

The federal government is planning to promulgate a Presidential Ordinance for introducing a new Schedule in the Income Tax Ordinance 2001 to deal with all the Capital Gains Tax (CGT) related issues of investors of stock exchanges. Sources told Business Recorder here on Thursday that the revised CGT regime for the investors of stock exchanges could not be implemented through amendment in Income Tax Rules or statutory regulatory order (SRO).
Similarly, issuance of an income tax circular would also not serve the purpose. A new Schedule is needed to be introduced in the Income Tax Ordinance 2001 to effectively tackle all issues of CGT on investors of stock exchanges. The proposed changes in implementation of Capital Gain Tax aimed at simplifying the mechanism, improvement in its enforcement and broadening of the tax base.
In this connection, the Federal Board of Revenue (FBR) is expected to propose amendment in the Income Tax Ordinance to introduce a new Eighth Schedule through a Presidential Ordinance. On the pattern of a Banking Schedule (Seventh Schedule) of the Income Tax Ordinance, a separate Schedule like Eight Schedule would be introduced in the Ordinance 2001. A separate banking schedule covers all tax related issues of banking sector and similar kind of a separate Schedule for the stock market investors is needed to explicitly deal with the issues of the CGT, sources explained. Through the Presidential Ordinance, a new Income Tax Schedule would cover all the issues of the CGT through proper legislation, sources added.
Sources further stated that the SRO cannot be issued to introduce amendments in the tax laws for the CGT purposes. It is worth mentioning that the Tax Reform Co-ordination Group (TRCG) had constituted the "Implementation Group" comprising TRCG members, FBR officials and SECP representatives to ensure implementation of the proposed changes in the revised CGT regime. During the last TRCG meeting, it was also discussed to introduce minimum holding period of 120 days for investors of stock market for a period of two years up to June 30, 2014. In this regard, the "Implementation Group" would work out the modalities for implementation of the proposal.