Inside Financial Markets

How To Avoid Capital Gain Tax Or Minimize Your Tax Liabilities

Here Is The Trick From Analyst That How To Avoid Capital Gain Tax Or Minimize Your Tax Liabilities

  • How many of you have bought PIBTL at Rs. 120 + and have not sold it
  • How many of you have bought PRL at 130+ and have not sold it
  • How many of you have bought Treet at 125+ and have not sold it.
All of the above companies have issued right shares PIBTL at 10 Rs.
PRL at 10 Rs.
Treet at 50 Rs. (40 Rs. premium)

Analyst assuming people went for right issue and paid the amount.

Someone has 1000 shares of PIBTL, right issue was nearly 1260%

Now the person has 13600 shares of PIBTL.

The formula to calculating capital gain or loss is based on inventory valuation method FIFO (First in first out)

If we break up these PIBTL shares the FIFO method is something like this: -1000 shares @ 120 Rs. 12600 shares @ 10 Rs.
the current rate is around 28.50 Rs.

If you sell 1000 shares @ 28.50 now, you will incur a loss of Rs. 91,500 to get to capital gain loss tax which is currently 15%. Capital tax loss 13725

Now you have sold 4,000 shares of PIBTL at 28.50, you made a gain, your capital gain 74,000. Current tax rate 15%, your capital gain tax 11100 Rs. still you are in tax loss of Rs. 2625…

Now if you sell more 1000 shares of PIBTL, here you are charged capital gain tax and your account being debit (through your broker) , these taxes are recovered by NCCPL.

One more example, there is one particular share, POL you bought at 430 Rs. and you do not want to sell, you want to hold it. but on daily basis you make money and giving capital gain taxes, now look carefully, sell one day your POL shares let’s say 320 Rs, but next day you buy it . this will generate huge loss to you, you POL is back in your portfolio.

Baqar Hussain

A Wannabe CFO, just had stepped in the corporate sector, willing to explore every aspect here and learn as mush as i can, awareness for those who dont, get the info where ever possible and stay up to date always.

The Canadian Securities Institute


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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)