FBR Proposes Amendments to Income Tax Rules 2002

The Federal Board of Revenue (FBR) has proposed amendments in the special procedures for computation of capital gains and collection of tax on disposal of securities by the National Clearing Company of Pakistan Limited (NCCPL).

The FBR has proposed amendments in the Income Tax Rules, 2002 through a notification issued on Tuesday.

A tax expert told Propakistani that the FBR issued the draft notification, much awaited by investors in stock exchange fulfilling their demands by allowing adjustment of capital loss suffered by them due to pandemic of covid during 2019 and 2020. However considering a large number of investors being not on the ATL list, the incentive is not allowed to the persons who are not on the Active Taxpayers List.

The loss on sale of securities can now be adjusted in the tax year 2021 and following 3 years of active taxpayers. Further, Adjustment of carried forward losses shall be made on monthly basis by NPCCL from the first month of updation of ATL for that tax year, tax expert added.

Under the new notification, the FBR has proposed that the setting off of eligible capital loss carried forward from previous tax years shall be made by the National Clearing Company of Pakistan Limited (NCCPL) only in respect of taxpayers whose names appear on the Active Taxpayer List (ATL).

According to the draft amendments, the setting off of eligible capital loss carried forward from previous tax years shall be made by the National Clearing Company of Pakistan Limited (NCCPL) only in respect of taxpayers whose names appears on the Active Taxpayer List (ATL) pertaining to the tax year to which such losses pertain as witnessed by the ATL available on the FBR website after updation of the tax year to which such loss pertains.

The FBR stated that the capital loss arising on the disposal of listed securities in tax year 2019 and onwards that has not been set off against the gain of the person from the disposal of listed securities chargeable to tax during the tax year shall be carried forward to the following tax year and set off only against the gain of the person from the disposal of listed securities chargeable to tax but no such loss shall be carried forward to more than three tax years immediately succeeding the tax year for which the loss was first determined.

Under the existing rules, the capital loss arising on the disposal of listed securities in any financial year shall not be carried to a subsequent financial year.

The draft amendments revealed that the capital loss arising on the disposal of listed securities in the tax year 2019 and onwards that has not been set off against the gain of the person from the disposal of listed securities chargeable to tax during the tax year shall be carried forward to the following tax year and set off only against the gain of the person from the disposal of listed securities chargeable to tax but no such loss shall be carried forward to more than three tax years immediately succeeding the tax year for which the loss was first determined.

The capital loss arising on the disposal of listed securities in the tax year 2019 and onward shall be carried forward to a subsequent tax year for setting off, in the manner prescribed as follows:—

  • The setting off of eligible capital loss carried forward from previous tax year(s) shall be made by NCCPL under this Rule, only in respect of a taxpayer whose name appear or appeared in the Active Tax Payers List [ATL] pertaining to the tax year to which such loss pertains as witnessed by the Active Tax Payers List [ATL] available on FBR’s website after updation for the tax year to which such loss pertains;
  • Adjustment of carried-forward capital loss(es) shall be made on monthly basis by NCCPL from the first month of updation of ATL for that tax year and on a first-in-first-out (FIFO) basis;
  • NCCPL may requisition date-wise position of Active Tax Payers List [ATL] in respect of particular taxpayer from Information Technology (IT) Wing of the Board as and when required.

The FBR added that at the end of the relevant tax year, NCCPL shall maintain tax year-wise balance of unexpired carried-forward capital losses separately identifiable for computation of limitation period for each tax year.

Courtesy: Pro Pakistani

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