1
Q
Head of income for capital gains?
A
Section 37 – Income from Capital Gains (gain on disposal of capital asset)
2
Q
Basic capital gain formula u/s 37(2)?
A
Gain = Consideration received – Cost of asset
3
Q
Capital asset u/s 37(5) excludes what 3 items?
A
- Stock-in-trade (except shares)
- Depreciable / amortizable assets
- Immovable property (covered u/s 37(1A))
4
Q
FMV rule for immovable property disposal u/s 37(1A)?
A
Higher of:
* Consideration received
* FBR notified value u/s 68
5
Q
Section 37A applies to?
A
Disposal of securities (listed shares, sukuk etc.)
Separate block of income; NCCPL collects tax
6
Q
Section 37A holding period rates (filer)?
A
≤ 12 months → 15%12 months → 12.5% (NCCPL settled)
7
Q
Section 7E – deemed income formula?
A
5% of FMV → taxed @ 20% (effective 1%)
Applies if aggregate FMV > Rs. 25 million after exclusions
8
Q
4 major exclusions from Section 7E aggregate FMV?
A
- One self-occupied house
- Self-owned business premises (if on ATL)
- Pure agricultural land
- First year acquisition if 236K paid
9
Q
Link between 236K and 7E?
A
First tax year of acquisition excluded from 7E if 236K tax paid by purchaser
10
Q
Section 79 purpose?
A
Non-recognition rules – no gain/loss shall be taken to be arise on the disposal of an asset in different cases
11
Q
What is the threshold for Section 7E deemed income to apply?
A
Aggregate FMV of capital assets (after exclusions) must exceed Rs. 25 million on the last day of the tax year (30 June).
If ≤ Rs. 25m → Nil deemed income.
Tax = 5% of FMV × 20% = effective 1% of FMV.
12
Q
Why is Resident ATL status important for Section 7E?
A
Self-owned business premises (shop/office/factory) are excluded from aggregate FMV only if the owner is on the Active Taxpayers List (ATL) at any time during the tax year.
Non-ATL → premises counted → higher chance of crossing Rs. 25m threshold.
13
Q
Section 236K withholding rate (2025 context) and who pays?
A
Rate: 3% (or filer/non-filer rates) on higher of sale consideration or FBR notified value u/s 68.
Paid by buyer at time of purchase/transfer/registration.
Adjustable against final tax liability.
14
Q
When is immovable property excluded from Section 7E?
A
If Immovable property in the first tax year of acquisition where tax under section 236K has been paid
From next tax year → included (unless other exclusions apply).
15
Q
Section 79(1)(a) – gift to relative – who qualifies as relative?
A
Relative (for gift non-recognition) includes:
Spouse
Parents / grandparents
Children / grandchildren
Adopted children (self or spouse)
Siblings and cousins usually do NOT qualify → CGT triggers on FMV.
16
Q
Trap in Section 79(2) – non-resident acquirer?
A
Non-recognition under Section 79 does NOT apply if the person acquiring the asset is a non-resident at the time of acquisition.
Common exam trap: Gift to non-resident child → CGT arises for donor.
17
Q
Limitation on Section 79 non-recognition?
A
Does NOT apply if acquirer is non-resident u/s 79(2)
17
Q
Section 79 – 4 key clauses?
A
a) Gift to relative
(b) Amalgamation
(c) Spouses under agreement to live apart
(d) Like-kind replacement within 1 year
17
Q
Section 236K – who pays & rate?
A
Buyer pays at purchase/registration
Rate: 3% (or filer/non-filer) on higher of consideration or FBR value
17
Q
Section 236C – who pays & rate?
A
Seller pays at registration of deed
Rate: 3% on value
18
Q
Difference between 236K and 236C?
A
236K = Buyer at purchase
236C = Seller at registration
Both adjustable in return
19
Q
Section 59 group relief – holding %?
A
75% or more (55% if subsidiary listed)
20
Q
Entities excluded from Eighth Schedule?
A
Mutual fund, banking company, NBFC, insurance (Fourth Schedule), company on debt securities only, notified persons, opt-out persons
21
Q
Penalty for concealment u/s 182?
A
100% of tax due on concealed amount (or higher in willful cases)
22
Clause 5A Second Schedule exempts what?
CGT on securities acquired before 1 July 2013 (often 0%)
23
Section 37A – NCCPL-settled vs off-market transactions?
NCCPL-settled (PSX trades) → Section 37A applies → tax collected by NCCPL → often final tax.
Off-market / unlisted → falls under general Section 37 → normal CGT computation + possible withholding.
24
Clause 5AA Second Schedule?
Exemption on certain gains on securities or immovable property under specific conditions (check latest Finance Act)
24
Penalty u/s 182 for failure to file return?
Rs. 40,000 or 0.1% of tax payable (whichever higher) per day of default.
Maximum penalty capped at the amount of tax payable.
25
Penalty u/s 182 for concealment / false statement?
100% of the tax due on the concealed amount (or higher in willful cases).
Can also attract prosecution in serious cases.
26
Clause 5A Part II Second Schedule – exemption scope?
Exemption from capital gains tax on disposal of securities acquired before 1 July 2013 (often 0% CGT in practice for such holdings).
27
What is the role of NCCPL in Section 37A?
NCCPL (National Clearing Company of Pakistan Ltd) computes and collects CGT monthly on NCCPL-settled listed securities transactions under Eighth Schedule regime.
28
Why are banking companies / NBFCs excluded from Eighth Schedule?
They are taxed under special regimes (e.g., Fourth Schedule for banks/insurance) → Eighth Schedule (NCCPL collection) does not apply to avoid overlap.
29
Section 59 – conditions for group relief (loss surrender)?
1. Holding ≥ 75% (55% if subsidiary listed)
2. SECP/SBP approval where required
3. Loss surrendered must be assessed loss
4. No third-party transfer in share acquisition
30
Planning benefit of Section 59 group relief?
Allows profitable holding company to offset subsidiary’s assessed business losses → reduces overall group tax liability → tax deferral / savings.
31
No gain or loss situation on disposal of an asset
What is “like-kind replacement” u/s 79(1)(d)?
Replacement with same kind of Asset
By reason of compulsory Acquisition of the asset under any law where consideration received for the disposal is reinvested by the receipient in an asset of a like kind within one year of disposal
32
How does 236C withholding work at registration?
Registrar/Sub-registrar collects 3% advance tax from seller at time of deed registration.
Exempt in cases like gift to relative u/s 79, inheritance.
32
Common mistake in Section 37A holding period?
Forgetting to count exact days (not months).
Holding = date of acquisition to date of disposal (inclusive).12 months = >365 days usually.
33
Why is Section 7E called “wealth tax in disguise”?
Taxes idle/unused immovable property (even if no rental income) → aims to discourage holding vacant plots/houses → effective 1% annual tax on FMV above threshold.
34
Exam trap – non-resident seller of repatriable shares?
Seller needs certificate from Commissioner confirming tax liability discharged (u/s 37(6)–(10)) before SBP allows transfer/registration/repatriation.
35
Most repeated examiner complaint about Section 37A (securities gains)?
"Many candidates failed to apply correct holding period rates or distinguish NCCPL-settled vs. off-market transactions. Exemptions under Clause 5A/5AA not discussed properly."
Advice: Calculate exact days (not months), state NCCPL-settled = final tax u/s 37A & Eighth Schedule, off-market = general Section 37. List exemptions separately.
36
Top mistake examiners see in Section 7E (deemed income)?
"Exclusions (one house, business premises, ATL status, first-year acquisition with 236K paid) were ignored or incorrectly applied. Aggregate FMV calculation included exempt assets."
Advice: Always list exclusions first in bullets → exclude one house, business premises (only if on ATL), agricultural land, first-year acquisition (if 236K paid). Then compute remaining FMV.
37
Frequent error in Section 37(1A) immovable property capital gain?
"FMV not taken as higher of consideration/FBR value. Holding period or property type (open plot vs. house vs. commercial) ignored."
Advice: State rule: FMV = higher of consideration received or FBR notified value u/s 68. Show holding period and apply correct rate per property type.
38
Common confusion examiners note about 236K and 236C?
"Confusion between buyer-side (236K) and seller-side (236C) withholding. Exemptions (relatives, inheritance, gifts u/s 79) not mentioned. No link to 7E exclusion in acquisition year."
Advice: Clearly separate: 236K = buyer pays at purchase, 236C = seller pays at registration. List exemptions in bullets. Write: "236K paid → excluded from 7E in first tax year."
39
What examiners repeatedly say about Section 59 group relief answers?
"Incorrect holding threshold (75% vs. 55% for listed companies). Conditions (SECP/SBP approval, no third-party transfer) ignored. No planning advice given."
Advice: State: 75% general, 55% if subsidiary listed. List all conditions. End with planning: "Allows loss offset → tax deferral for group."
40
Overall presentation mistake examiners complain about most?
"Poor understanding of question requirement – many stopped at taxable income without tax liability. No workings shown. Planning/advice part missing. Answers too general, no specific application."
Advice: Structure every answer: 1. Facts summary 2. Law/provision 3. Application with step-by-step workings 4. Conclusion (tax payable) 5. Separate heading "Tax Planning Advice" with 3–5 points.
41
What examiners want you to always do in planning/ethics questions?
"Penalties not discussed where concealment/default evident. Ethics/planning aspects ignored."
Advice: If concealment → state penalty u/s 182 (100% of tax due). Always include practical planning (e.g., gift u/s 79, maintain ATL, group structure). Use current Finance Act rates/exemptions.
42
Mr. Ali (resident, on ATL) sold an open plot on 15 March 2025 for Rs. 60 million (purchased in 2019 for Rs. 25 million). FBR notified value u/s 68 is Rs. 58 million. Compute capital gain and tax payable.
FMV = higher of 60m & 58m = Rs. 60 million
Cost = Rs. 25 million
Capital gain u/s 37(1A) = 60m – 25m = Rs. 35 million
Tax (open plot, holding >4 years, filer) ≈ 15% = Rs. 5.25 million (exact rate per latest Division I)
43
Mrs. Sana (resident) sold listed shares on 1 June 2025. Cost Rs. 8 million, sale Rs. 14 million, holding period 14 months, NCCPL-settled, filer. Compute CGT.
Holding >12 months → rate u/s 37A = 12.5%
Gain = 14m – 8m = Rs. 6 million
Tax = 6m × 12.5% = Rs. 750,000 (final tax if NCCPL)
44
Mr. Bilal owns: self-occupied house (FMV 40m), commercial shop (self-used, ATL, FMV 28m), open plot (FMV 35m). Aggregate FMV after exclusions? Tax u/s 7E?
Exclusions: self-occupied house + business premises (ATL)
Remaining: open plot = Rs. 35 million (>25m)
Deemed income = 5% × 35m = Rs. 1.75 million
Tax @ 20% = Rs. 350,000
45
Mr. Zain bought residential flat on 10 Jan 2025 for Rs. 55 million (236K paid Rs. 1.65m). FMV 60m. Is it included in 7E for TY 2025?
Yes — first tax year of acquisition
Excluded from 7E aggregate FMV because tax u/s 236K paid
No deemed income on this flat in TY 2025
46
Father gifted house (FMV 70m, cost 30m) to son in TY 2025. Compute CGT for father.
Section 79(1)(a) – gift to relative (son)
No gain or loss recognized
CGT = Nil
Cost carries over to son = Rs. 30 million
47
Company A (listed) holds 60% in Company B (listed). Can A claim group relief for B’s assessed loss of Rs. 40 million?
yes — holding must be ≥ 55% for listed subsidiary (Section 59(1))
60% is sufficient → Yes, loss of Rs. 40 million can be surrendered to A.
48
Mr. Farhan sold shares (cost 10m) for 18m after 8 months (NCCPL, filer). Compute CGT.
Holding ≤ 12 months → rate u/s 37A = 15%
Gain = 18m – 10m = Rs. 8 million
Tax = 8m × 15% = Rs. 1.2 million
49
Mrs. Hina owns 2 houses (FMV 30m & 45m), business office (ATL, FMV 20m). Aggregate FMV after exclusions? 7E tax?
Exclude: one house + business premises (ATL)
Remaining: second house = Rs. 45 million (>25m)
Deemed income = 5% × 45m = Rs. 2.25 million
Tax @ 20% = Rs. 450,000
50
Plot bought Dec 2024 for Rs. 50m (236K paid). Sold June 2025 for Rs. 65m. Compute gain & any 7E impact in TY 2025.
Gain u/s 37(1A) = 65m – 50m = Rs. 15 million
7E: first tax year of acquisition → excluded from aggregate FMV (236K paid)
No deemed income on this plot in TY 2025
51
Non-resident buyer purchases house from resident seller for Rs. 80m (FMV 85m). Does non-recognition u/s 79 apply if gifted?
No — Section 79(2) states: non-recognition does not apply if acquirer is non-resident
CGT arises for seller on FMV Rs. 85m (higher value)
52
Mr. Kamran (resident, ATL) purchased a residential plot on 10 February 2025 for Rs. 48 million (236K tax of Rs. 1.44 million paid by buyer). FMV on 30 June 2025 is Rs. 52 million. He also owns a self-occupied house (FMV Rs. 38 million) and a self-used office (FMV Rs. 18 million). Compute deemed income and tax u/s 7E for TY 2025.
Aggregate FMV before exclusions: 52m + 38m + 18m = Rs. 108 million
Exclusions:
Self-occupied house → excluded
Self-used office (business premises + ATL) → excluded
Plot → excluded (first tax year of acquisition + 236K paid)
Aggregate after exclusions = Rs. 0
Threshold Rs. 25m not crossed → Deemed income = Nil
Tax u/s 7E = Nil
53
Mr. Tariq sold an open plot (purchased 2018 for Rs. 22 million) on 5 April 2025 for Rs. 55 million. FBR value u/s 68 is Rs. 57 million. Compute gain and CGT.
FMV = higher of 55m & 57m = Rs. 57 million
Cost = Rs. 22 million
Gain u/s 37(1A) = 57m – 22m = Rs. 35 million
Tax (open plot, long holding, filer) ≈ 15% = Rs. 5.25 million (per Division I rates)
53
Ms. Ayesha (filer) disposed of listed shares on PSX on 20 May 2025. Acquisition cost Rs. 12 million, sale proceeds Rs. 21 million, holding period 15 months, NCCPL-settled. Compute capital gain and tax u/s 37A.
Holding > 12 months → rate u/s 37A = 12.5%
Gain = 21m – 12m = Rs. 9 million
Tax = 9m × 12.5% = Rs. 1,125,000 (final tax via NCCPL)
54
Mr. Saad (non-ATL) gifted a commercial building (FMV Rs. 65 million, cost Rs. 28 million) to his brother in TY 2025. Compute CGT for Mr. Saad.
Section 79(1)(a) – gift to relative
Brother does not qualify as “relative” for non-recognition (only spouse/parents/children/grandchildren/adopted).
Deemed disposal at FMV Rs. 65 million
Gain = 65m – 28m = Rs. 37 million
CGT arises (tax at applicable rate)
55
Holding company H Ltd (resident) holds 62% shares in listed subsidiary S Ltd. S Ltd has assessed business loss of Rs. 50 million in TY 2025. Can H Ltd set off the loss? Compute relief.
Section 59 – holding ≥ 55% for listed subsidiary → Yes, 62% qualifies
Assessed loss of Rs. 50 million can be surrendered
Relief = Rs. 50 million set off against H Ltd’s taxable income
55
Mr. Imran (filer) sold listed shares (cost Rs. 5 million) for Rs. 9 million after 9 months (NCCPL-settled). Compute CGT.
Holding ≤ 12 months → rate u/s 37A = 15%
Gain = 9m – 5m = Rs. 4 million
Tax = 4m × 15% = Rs. 600,000 (final tax)
56
Company owns 3 plots (FMVs Rs. 20m, 18m, 30m). All business premises (ATL). Compute 7E deemed income.
Exclusions: self-owned business premises (ATL) → all 3 excluded
Aggregate FMV after exclusions = Rs. 0
Threshold not crossed → Deemed income = Nil
Tax u/s 7E = Nil
57
Mr. Fahad bought house on 1 August 2024 for Rs. 70 million (236K paid). FMV 30 June 2025 = Rs. 78 million. Is it included in 7E for TY 2025?
First tax year of acquisition (TY 2025)
Excluded from 7E aggregate FMV because 236K tax paid
No deemed income on house in TY 2025
58
Father transferred shares (cost Rs. 15 million, FMV Rs. 40 million) to non-resident son in TY 2025. Compute CGT for father.
Section 79 non-recognition does not apply u/s 79(2) – acquirer is non-resident
Deemed disposal at FMV Rs. 40 million
Gain = 40m – 15m = Rs. 25 million
CGT arises (tax at applicable rate)
59
Mr. Omar concealed Rs. 12 million income in TY 2025 return. Tax on concealed amount Rs. 3.6 million. Compute penalty u/s 182.
Concealment u/s 182 → penalty = 100% of tax due on concealed amount
Penalty = 100% × Rs. 3.6 million = Rs. 3.6 million
Total liability = tax + penalty = Rs. 7.2 million
60
Section 152(1D) non-resident ke capital gain pe withholding rate aur condition kya hai?
Every banking company or financial institution maintaining SCRA or NRVA of a non-resident (no PE in Pakistan) shall deduct tax from capital gain on disposal of debt securities and government securities through the account at 10%, which is the final tax.
Conditions for 10%:
1. SCRA maintained for not less than 6 months
2. Holding period of security 6 months or more
If either condition not met → rate 20% (still final tax).
60
Section 152(1D) mein capital loss adjustment aur equity instruments ka treatment kya hai?
No adjustment of capital loss is allowed by banking company or financial institution while deducting 10% (or 20%) withholding tax.
For equity instruments (PSX shares) held by non-residents:
1. Capital gain → 15% final tax (via NCCPL if settled through them)
2. Dividend → 15% final withholding u/s 150
Rates largely aligned at 15% for equity returns.
61
Non-resident investor (no PE) disposes debt securities through SCRA:
>Holding period: 8 months
>SCRA maintained: 7 months
Gain: Rs. 20 million
Compute withholding tax u/s 152(1D).
Both conditions met (holding >6 months, SCRA >6 months)
→ rate 10% final tax.
Withholding tax
= 20m × 10% = Rs. 2 million (final tax).
No capital loss adjustment allowed.
62
Non-resident investor (no PE) disposes government securities through SCRA:
Holding period: 4 months
SCRA maintained: 9 months
Gain: Rs. 15 million
Compute withholding tax u/s 152(1D).
Holding <6 months (condition not met) → rate 20% (even though SCRA >6 months).
Withholding tax
= 15m × 20% = Rs. 3 million (final tax).
No capital loss adjustment allowed.
62
Securities borrowing tax treatment for borrower?
Capital gain = (Short sale consideration – Repurchase price – Financial charges on borrowing).
Net difference = capital gain/loss.
Borrower short sells borrowed securities:
short sale Rs. 50 million,
repurchase Rs. 45 million,
financial charges Rs. 2 million. Compute gain/loss.
Gain = 50m – 45m – 2m = Rs. 3 million (capital gain). Tax u/s 37A (rate per holding).
63
In Which cases no gain or loss is considered to have been taken place
> Non-Recognition rule
> Disposal of asset betwee wholly owned group companies, through scheme of corporate arrangementand reconstruction
> Transfer of share between group companies for availing group shares
