Capital Gains Tax Alert for Investors: What You Must Know About Section 151A in 2025–26
The Federal Board of Revenue (FBR) has again reminded the investing community about the mandatory nature of tax deduction at source on capital gains on debt securities, which would remain operative in Tax Year 2026. It is imperative to understand the implication of the above-said provision for the investing community.
What Is Section 151A All About?
Section 151A of the Income Tax Ordinance, 2001 applies to capital gains earned from the sale or disposal of debt securities. These include:
• Government securities
• Corporate debt instruments
• Other debt securities held via Investor Portfolio Securities (IPS) accounts
In other words, if you earn any profit from such securities, tax needs to be deducted at source.
Who Deducts the Tax?
The duty of deducting the tax does not rest on the investor. It is deducted by the following:
• The custodian of the debt securities, or
• The Bank holding the IPS account
At the time of sale of securities, the custodian or bank transfers a tax at a prescribed rate, which is under Division IIIAA of Part III of the First Schedule, directly to the government treasury.
Very Important Exemption to Remember
Not all transactions are governed by Section 151A. If debt securities are:
Those of a
• Traded on a registered stock exchange, and
• Settled through National Clearing Company of Pakistan Limited (NCCPL)
Then, Section 151A does not apply to those transactions.
How Is Capital Gain Calculated?
The taxable capital gain is calculated under Section 37A(1A), based on a formula that provides for an accurate calculation of profit or loss.
What Investors Should Do in 2025
Tax professionals give the following tips to investors:
• Record all disposals and gains properly
• Verify whether it applies under Section 151A or is exempt
• IPS statements and tax deductions scrutiny
• Rely on tax specialists for handling complicated instruments
Conclusion
More vigorous compliance and documentation starting from 2025-26 means investors will need to be aware of details about source deductions on gains. You can therefore use the information on Section 151A to ensure you are complying and making efficient investment decisions.