Circular No. 04 of 2004

(Income Tax)

Subject: DEDUCTION OF WITHHOLDING TAX BY A REGISTERED STOCK EXCHANGE ON COMMISSION INCOME OF A MEMBER OF STOCK EXCHANGE.

A registered stock exchange in Pakistan shall collect tax at the rate of 0.005% of the purchase value and 0.005% on sale value of shares with effect from July 1, 2004 from its members in lieu of the commission earned on purchases/sales transacted through automated trading system in ready, future, provisional and any other counter(s) of the stock exchange.

2. Any purchase and sale carried by the brokerage houses and/or their agents either manually and/or through electronic system including matching of orders in any internet based trading system and not routed through the stock exchange automated system, shall also be liable to be taxed at the same rate. The member concerned of the stock exchange shall pay tax on such purchase/sale including proprietary trade, if any, alongwith the statement specified in para 5 of this circular to the stock exchange. In case of no transactions, a nil statement shall be submitted by member concerned.

3. The payment of tax in respect of para 1 and 2 above would be a final tax liability of the member concerned. By virtue of this, the provisions of section 233 of Income Tax Ordinance, 2001 shall not be applicable to the members of the stock exchange.

4. The provisions relating to section 147 (advance tax payments) shall not apply in respect of commission income on which tax has been paid as per para 1 and 2 above. However, if the income of the member is from any other source, such member has to pay advance tax in accordance with the provisions of section 147.

5. The amount of tax collected shall be deposited on 25^th of each month into govt. treasury. The copy of paid challan alongwith the following statement shall be forwarded to the CIT concerned holding jurisdiction over the concerned stock exchange.

STATEMENT REGARDING COLLECTION OF ADVANCE TAX UNDER CLAUSE (a) & (b) OF SUB-SECTION (1) OF SECTION 233A OF INCOME TAX ORDINANCE, 2001.

NAME OF REGISTERED STOCK EXCHANGE __________________________

STATEMENT FOR THE MONTH _________________________________

S.No.

Name of the Member/Broker

Amount of Total Purchases of shares

Amount of Total sale of shares

Tax collected

Date of payment into govt. treasury.

(ABDUL HAMID)

SECRETARY (IT POLICY)