The Federal Board of Revenue (FBR) has revised the procedure for the computation of capital gains and collection of tax for securities of unlisted companies who get themselves listed on the stock exchange.
The FBR vide SRO 1570(I)/2022 issued amendments to special procedures for computation of capital gains and collection of tax for securities.
The amendment provided that the cost of acquisition of such securities shall be the face value instead of the market price. An example with a scenario has also been inserted under Rule 13P for the computation of capital gain for such conversions.
Under the revised regulations, where securities of unlisted companies are converted into listed form, the cost of acquisition of such securities shall be the face value and the date of acquisition shall be the date of acquisition as available with CDC. Provided that the cost of acquisition of securities in case of securities acquired during the book building process and initial public offer (IPO) period shall be the applicable IPO price; and for computation of capital gains, it added.
Example
A, being a client of a broker, has 1,000 shares of the company, ABC, in his account. He acquired 1,000 shares on 1 January 2013 at Rs. 10 per share when the company was a private/public unlisted company having a face value of the share of Rs. 10 and transfers the same in electronic form with CDC on 1 February 2013.
ABC company initiated the listing process on the stock exchange on 1 April 2015 and offered shares to investors during the initial public offer (IPO) period at an IPO price of Rs 15. Mr. A acquired 500 shares of ABC company during the IPO period. ABC company was listed on the stock exchange on 1 July 2015 at a listing price of Rs. 20. Mr. A acquired 500 shares of ABC company from the stock market on 1 September 2015 at Rs. 22 per share. He disposed of 500 shares on 1 January 2022 at Rs. 25 per share, 1,000 shares on 8 February 2022 at Rs. 30 per share, and 500 shares on 1 March 2022 at Rs. 35 per share.
NCCPL shall compute capital gain and tax thereon, if any, in the following manner: The date of acquisition will be based on CDC data, while face value will be entered as the cost of acquisition for shares acquired before the IPO period, whereas the cost of acquisition for shares acquired during the IPO period shall be the IPO price. A, being a client of a broker, has 1,000 shares of company ABC in his account. He acquired 1,000 shares on 1 January 2013 at Rs. 10 per share when the company was a private/public unlisted company having a face value of the share of Rs. 10 and transfers the same in electronic form with CDC on 1 February 2013.
