ITO Section 37

Capital gains.

(1) Subject to this Ordinance, a gain arising on the disposal of a capital asset by a person in a tax year, other than a gain that is exempt from tax under this Ordinance, shall be chargeable to tax in that year under the head “Capital Gains”.

(1A) Notwithstanding anything contained in sub-section (1), gain arising on disposal of immovable property situated in Pakistan, to a person in a tax year shall be chargeable to tax under the head capital gains at the rates specified in Division VIII of Part I of the First Schedule.

(2) Subject to sub-section (4), the gain arising on the disposal of a capital asset by a person shall be computed in accordance with the following formula, namely:—
A – B

where —

• A is the consideration received by the person on disposal of the asset; and
• B is the cost of the asset.

(3)  omitted by the Finance Act, 2022

(4) For the purposes of determining component B of the formula in sub-section (2), no amount shall be included in the cost of a capital asset for any expenditure incurred by a person –

• (a) that is or may be deducted under another provision of this Chapter; or
• (b) that is referred to in section 21.

(5) In this section, “capital asset” means property of any kind held by a person, whether or not connected with a business, but does not include —

• (a) any stock-in-trade, consumable stores or raw materials held for the purpose of business;
• (b) any property with respect to which the person is entitled to a depreciation deduction under section 22 or amortisation deduction under section 24;
• (c) [Omitted ]
• (d) any movable property excluding capital assets specified in sub-section (5) of section 38 held for personal use by the person or any member of the person’s family dependent on the person.

(6) The person acquiring a capital asset, being shares of a company, shall deduct advance adjustable tax from the gross amount paid or payable as consideration for the shares at the time of payment or at the time of registration of shares by the Securities and Exchange Commission of Pakistan or by the State Bank of Pakistan, whichever is earlier, at the rate of ten percent of the fair market value of the shares which shall be paid to the Commissioner by way of credit to the Federal Government, within fifteen days of the payment.

(7) Notwithstanding the provisions of section 68, the value of shares, for the purpose of sub-section (6), shall be the fair market value, as prescribed for sub-section (4) of section 101A, without reduction of liabilities.

(8) The Commissioner may, on application made by the person acquiring the shares, and after making such inquiry as the Commissioner thinks fit, allow to make the payment, without deduction of tax or deduction of tax at a reduced rate.

(9) The provisions of sections 161, 162, entry No. 15 of the Table in section 182, clause (c) of sub-section (1) of section 191 and section 205 shall mutatis mutandis apply to the tax deductible and payable under this section.

(10) The person disposing of the capital asset, being shares of a company, shall furnish to the Commissioner within thirty days of the transaction of disposal, the prescribed information or documents, in a statement as may be prescribed:

• Provided that the Commissioner may, by notice in writing, require the said person, to furnish information, documents and statement within a period of less than thirty days as specified in the notice.