FCVAs, FCBVAs, NRVAs & NRBVAs: Banks required to cut WHT from capital gains: FBR
ISLAMABAD: Banks having Foreign Currency Value Accounts (FCVAs), Foreign Currency Business Value Accounts (FCBVAs), Non-Resident Rupee Value Accounts (NRVAs) or Non-Resident Rupee Business Value Accounts (NRBVAs) are required to deduct withholding tax from capital gain arising on the disposal of debt instruments and government securities/certificates invested though these accounts. In this…
The Federal Board of Revenue (FBR) has issued a circular clarifying that banks with Foreign Currency Value Accounts (FCVAs), Foreign Currency Business Value Accounts (FCBVAs), Non-Resident Rupee Value Accounts (NRVAs) or Non-Resident Rupee Business Value Accounts (NRBVA) must deduct withholding tax from capital gains from disposing of debt instruments and government securities/certificates held in these accounts.
In Income Tax Circular No. 2 of 2026, section 100B clause (b) of subsection (2) no longer references "a non-banking finance company" and clauses (c) and (d) have been omitted. This extension applies capital gains provisions to non-banking finance companies, modarabas, and any company investing in debt securities. The FBR also introduced a new sub-section (3) in section 100B for mutual funds, banking companies, and insurance companies, requiring them to compute and determine capital gains under section 37A while continuing to pay tax as per existing provisions.
Sub-section (lDA) of section 152 has been amended to mandate deduction of tax from capital gains on debt instruments, government securities, and certificates, including Shariah-compliant variants. The FBR highlighted reduced tax rates, exempting profits from a rupee account held with a scheduled bank in Pakistan for NRVA or NRBVA account holders, provided the specified condition is met.
Private Equity and Venture Capital Funds with over 90% of their accounting income distributed to investors are also exempt from tax under new clause (99C). Clause (5AA) in Part II of the Second Schedule modifies the tax deduction rate for profit on debt to 10% when the debt instrument originated from a federal government public debt sale and was purchased exclusively through a bank account held in a repatriable NRAR, FCVA, FCBVA, NRV, or NRBVA account at a Pakistani bank.
Additionally, the minimum tax under section 113(1) has been reduced to 0.5% for distributors, dealers, sub-dealers, and wholesalers of specified goods, contingent on their inclusion on the active taxpayers' list issued under the Sales Tax Act 1990.
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