The CBR has clarified that the rate of withholding tax on all trading transactions made in the stock exchanges has been increased.
The explanatory circular said that the income tax was introduced to stock market through the Finance Act, 2004 in the form of withholding tax, as under: Purchase of shares in lieu of commission earned by members, 0.005 percent; sale of shares in lieu of commission earned by members 0.005 percent; value of the shares traded (Sale) 0.005 percent; financing of carryover trade (Badla) in shares by members of stock exchanges on amount of carryover charge 10 percent; and capital value tax (CVT) on the purchase value of shares @ 0.01 percent.
In 2006-07 budget, the rate of WHT on all trading transactions made in the stock exchanges has been increased: In case of purchase of shares 0.01 percent of purchase value; in case of sale of shares 0.01percent of sale value; and in case of trading of shares 0.01 percent of traded value.
In case of financing of carryover trades (Badla)/CFS the existing rate of 10 percent has been retained. However, CVT on purchase value of shares has been enhanced from 0.01 percent to 0.02 percent, the Board said.