Capital Gains – Section 37, 37A and 38

Gain arising on the disposal of a capital asset by a person in a tax year shall be chargeable to tax in that year under the head “Capital Gains”.
Gain shall be computed as:–
A – B
where —
A is the consideration received by the person on disposal of the asset; and
B is the cost of the asset.
Where a capital asset has been held by a person for more than one year, the amount of any gain arising on disposal of the asset shall be computed in accordance with the following formula, namely: —
A x ¾
where A is the amount of the gain determined as above
(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.
Where the capital asset becomes the property of the person —-
(a) under a gift, bequest or will;
(b) by succession, inheritance or devolution;
(c) a distribution of assets on dissolution of an association of persons; or
(d) on distribution of assets on liquidation of a company,
the fair market value of the asset, on the date of its transfer or acquisition by the person shall be treated to be the cost of the asset.
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 or amortization deduction;
(c) any immovable property;
(d) any movable property excluding following assets held for personal use by the person or any member of the person‘s family dependent on the person
(a) A painting, sculpture, drawing or other work of art;
(b) jewellery;
(c) a rare manuscript, folio or book;
(d) a postage stamp or first day cover;
(e) a coin or medallion; or
(f) an antique.
No loss shall be recognized under this Ordinance on the disposal of the above personal capital assets.
Capital gain on disposal of securities.— Section 37A
The capital gain arising on or after the first day of July 2010, from disposal of securities held for a period of less than a year, shall be chargeable to tax at the rates specified in Division VII of Part I of the First Schedule:
Provided that this section shall not apply :
1. if the securities are held for a period of more than a year:
2. to a banking company and an insurance company.
Security: means
  • share of a public company,
  • voucher of Pakistan Telecommunication Corporation,
  • Modaraba Certificate,
  • an instrument of redeemable capital and
  • derivative products.
Gain under this section shall be treated as a separate block of income.
Where a person sustains a loss on disposal of securities in a tax year, the loss shall be set off only against the gain of the person from any other securities chargeable to tax under this section and no loss shall be carried forward to the subsequent tax year.
Deduction of losses in computing the amount chargeable under the head Capital Gains — Section 38
A deduction shall be allowed for any loss on the disposal of a capital asset by the person in the year.
No loss shall be deducted under this section on the disposal of a capital asset where a gain on the disposal of such asset would not be chargeable to tax.