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KARACHI: Contrary to expectations of change in treatment of income from capital gain and dividends to normal tax, affecting net returns of the investors; the budget FY25 is overall positive for the market as the government has not changed treatment of CGT to normal tax, analysts said.

Alongside this, the maximum rate of 15 percent tax on CGT has also remained unchanged (though removed slab benefits on holding for more than a year on purchase after Jul 01, 2024) for tax filers and tax on dividend has also remained unchanged at 15 percent, they added.

To note, in anticipation of above measures, the market has lost 4.0 percent or 3,186 points in last 12 sessions.

The government has removed slab wise benefit on Capital Gain Tax (CGT) for holding securities for more than a year on purchase after Jul 01, 2024. However, the top slab rate is unchanged at 15 percent for tax filers, while non tax filers, rate has increased from 30 percent to 45 percent.

“We believe, this is positive for market as it was rumor in the market that, government is mulling to change the treatment of CGT from full and final tax to normal tax”, Topline Securities, in its report said. While in actual, there is no change in treatment of CGT this will remain as full and final, it added.

There is no change proposed in tax rates for dividends income for both filers and non filers. This is positive for market as there were some news reports suggesting tax on dividend income will go up. Also there were speculations about change in treatment of dividend income to normal income. Status quo on this is positive for market. There is also no change in bonus tax. This will be neutral to positive for market.

The minimum turnover tax has remained unchanged contrary to general expectations of increase in this rate. This will be positive for low margin businesses like OMCs, chemicals and steels etc.

“We believe, this budget will serve as a prior action for new IMF program,” the report said. Subject to successful passage of this budget in compliance with IMF measures, market PE will re-rate from current 3.4x to historic forward PE of 6.93x linearly in 3 years time, it added.

“That said, we believe forward PE by Jun 2025 will rise to 4.6x, taking our index target for Jun 2025 to 106,000, providing return of 46 percent. In line with this, our Index target for Dec 2024 is 87,000, providing return of 20 percent.”

Copyright Business Recorder, 2024

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