Section No. 2 of Income Tax Ordinance, 2001
(58) “share” in relation to a company, includes a modaraba certificate and the interest of a beneficiary in a trust (including units in a trust);
(70) “trust” means a “trust” as defined in section 80 of the Income Tax Ordinance, 2001;
Section No. 80 (2) of Income Tax Ordinance, 2001
(d) “trust” means an obligation annexed to the ownership of property and arising out of the confidence reposed in and accepted by the owner, or declared and accepted by the owner for the benefit of another, or of another and the owner, and includes a unit trust; and
(e) “unit trust” means any trust under which beneficial interests are divided into units such that the entitlements of the beneficiaries to income or capital are determined by the number of units held.
Rule No. 2(1) of the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003
(xxxvii) “open-end scheme” means a scheme constituted by way of a trust deed that continuously offers for sale its units as specified in the constitutive document that entitle the holder of such units on demand to receive his proportionate share of the net assets of the scheme less any applicable charges;
Section No. 62 of Income Tax Ordinance, 2001
Tax credit for investment in shares and insurance
(1) A resident person other than a company shall be entitled to a tax credit for a tax year either—
(i) (i) in respect of the cost of acquiring in the year new shares offered to the public by a public company listed on a stock exchange in Pakistan, provided the resident person is the original allottee of the shares or the shares are acquired from the Privatization Commission of Pakistan; or
(ii) (ii) in respect of any life insurance premium paid on a policy to a life insurance company registered by the Securities and Exchange Commission of Pakistan under the Insurance Ordinance, 2000 (XXXIX of 2000), provided the resident person is deriving income chargeable to tax under the head “salary” or “income from business”.
(2) The amount of a person’s tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula, namely: —
(A/B) x C
A is the amount of tax assessed to the person for the tax year before allowance of any tax credit under this Part;
B is the person’s taxable income for the tax year; and
C is the lesser of —
(a) (a) the total cost of acquiring the shares, or the total contribution or premium paid by the person referred to in sub-section (1) in the year;
(b) twenty percent of the person’s taxable income for the year; or
(c) one and half million rupees.
(3) Where —
(a) a person has been allowed a tax credit under sub-section (1) in a tax year in respect of the purchase of a share; and
(b) the person has made a disposal of the share within twenty-four months of the date of acquisition; the amount of tax payable by the person for the tax year in which the shares were disposed of shall be increased by the amount of the credit allowed.
DISCLAIMERS AND DISCLOSURES
All investments in Collective Investment Schemes and Voluntary Pension Schemes are subject to market risks. The NAV based prices of units and any dividends/returns thereon are dependent on forces and factors affecting the financial markets. These may go up or down based on market conditions. Past performance is not necessarily indicative of future results. Investors are advised to read the Trust Deed(s) and the Offering Document(s) of the Scheme carefully, in particular the Investment Policy, Risk Disclosures, Warning and Disclaimer sections, before making any investment decision. Withdrawals from a pension fund (VPS) before retirement are subject to tax as per provisions of Income Tax Ordinance, 2001.
The Scheme may hold certain non-compliant investments. Before making any investment decision, investors should review the latest monthly Fund Manager Report and Financial Statements of the Scheme particularly the details of non-compliant investments and Risk Factors.
The information in this literature is issued for indicative and informational purposes only and is based on MCB-AH's interpretation of the income tax laws, which to the best of the MCB-AH's understanding is correct. Investors are advised to seek independent advice so as to determine the taxability arising from their investment in the units of the collective investments schemes and/or voluntary pension schemes. All information contained here is based on current taxation status. The exemptions and rates of taxation are subject to change from time to time, as may be announced by the Government of Pakistan.