Circular No. 03 of 2004

(Income Tax)

Subject: DEDUCTION OF WITHHOLDING TAX BY A REGISTERED STOCK EXCHANGE ON SALE OF SHARES.

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

2. Any sale of shares 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 collect tax from its clients, and together with tax on proprietary trading, if any, shall pay tax on such sales alongwith the statement specified in para 4 of this circular to the stock exchange. In case of no transactions, a nil statement shall be submitted by the member concerned.

3. The tax collected at para 1 and 2 above would be adjustable against final tax liability of the seller of shares. All bills issued by the member of the stock exchange should clearly indicate the amount of tax on such sale.

4. 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 (c) 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

Amount of Total sale of shares

Tax collected

Date of payment into govt. treasury.

(ABDUL HAMID)

SECRETARY (IT POLICY)