KARACHI: The Karachi Stock Exchange (KSE), after receiving approval from the Central Board of Revenue (CBR), has stopped deducting with-holding tax on transactions of mutual funds, subject to provision of a certificate of exemption issued by the Commissioner of Income Tax.
The exemption has come into effect from September 15, 2004, while the exemption certificates would be granted under section 159 read with section 233A of the Income Tax Ordinance 2001 and would be issued by the Commissioner of Income Tax.
According to an official of the KSE on Wednesday, the KSE has deployed a software module incorporating the new change in the clearing and settlement process for issuing of payment orders to the members.
The mutual funds have been granted exemptions and non-deduction of with-holding tax levied on the sale on COT premium under Finance Bill 2004.
The Mutual Funds Association of Pakistan (MUFAP) had been negotiating with the CBR in collaboration with the KSE for quite some time to attain this exemption, the sources said.
According to the mechanism devised by the KSE, “the members are required to report the with-holding taxes calculated on behalf of their clients (mutual funds) to the Finance and Accounts Department of the Exchange, through a prescribed format at the end of each trading day.”
“The amount of with-holding tax belonging to the tax exempted clients, as reported by the members, shall be presented as negative figures in the payment orders of the relevant members and the net receivable or payable would be calculated accordingly by the exchange.”
The KSE has declared that the members would be “solely responsible for the accuracy and integrity of the information submitted” to it by the members, adding: “In case of delay, mistake, misreporting, concealment etc, no remedy would be available and the respective member shall be responsible for any consequences, whatsoever.”