Tax Book 2023

Capital Gains Chapter- 12

Public company u/s 2(47) means

 A Company listed in Pakistan at the year end; or

 A Company in which 50% or more shares are held by the Federal or Provincial

Government or a foreign Government or a foreign company wholly owned by a foreign

Government or

 A unit Trust.

Example: Which of the following capital assets are securities?

1. Jewellery


2. Shares of private company


3. Shares of public company


4. Painting


5. Musharika certificates


6. Vouchers of Pakistan Telecommunication Corporation


7. First day cover
   Solution: Item No. 3, 5 and 6 are securities, whereas the others fall in the definition of capital
   assets u/s 37.


8. Procedure to determine capital gain: [U/s 37(2), (3) and (4)]

2.1 The gain arising on the disposal of a capital asset by a person shall be computed in

accordance with the following formula:

Consideration received by the person on disposal

(Higher of fair market value or actual amount received)

Less: cost of the asset [consist of the following u/s 76(2)]

Consideration given for the asset

Incidental expenditure incurred in acquiring and disposing off the asset

Any expenditure incurred to alter or improve the asset

Balance shall be the capital gain or loss

2.2. No amount shall be included in the cost of a capital asset for any expenditure incurred by a

person that is or may be deducted under another provisions of the Ordinance or that is

referred as inadmissible u/s 21. [U/s 38(4)]

2.3 Where a capital asset has been held by a person for more than one year (other than capital

assets defined in section 37A) the amount of gain arising on disposal of the asset shall be

taken as 3/4th while the balance 1/4th shall automatically be excluded from the taxable

capital gain. However if there is capital loss under this section the same shall be fully

recognized without the application of said exemption. [U/s 37(3)] – omitted by FA, 2022

2.4 Capital gain on disposal of immovable property [U/s 37(3) & (3A) – Omitted by FA, 2022

Notwithstanding anything contained in sub-section (3), the amount of any gain arising on

disposal of immovable property shall be computed in accordance with the following formula,

namely:

S. No. Holding period Gain

(1) (2) (3)

1. Where the holding period of an immoveable property does not exceed
   one year A^


2. Where the holding period of an immoveable property exceeds one A x 3/4