CGT & Tax Exemptions

Invest in our investment schemes and avail tax exemptions on your return.

Exemption from Withholding Tax

Unlike other savings schemes, where the return you make on your investment is subject to deduction of 10% withholding tax, return on investments in mutual funds and investment plans is exempt from tax, except Capital Gains Tax (CGT). However, exemption from Capital Gains Tax (CGT) is also possible as explained below.

In case of investment in pension schemes, you may avail a tax waiver on 50% of your accumulated amount that you may withdraw at the time of maturity of your plan. This waiver is mentioned in Part I, Second Schedule to the Income Tax Ordinance, 2001.

Applicability of Capital Gains Tax (CGT) & possible exemption

Effective from July 1, 2010, Capital Gains Tax (CGT) was introduced in the Income Tax Ordinance, 2001 by the Finance Act 2010, whereby any gains made by a person on their investment held in a mutual fund scheme or investment plan would be subject to Capital Gains Tax (CGT) at the time of sale of such investment units held by them.

However, investors may enjoy an exemption from Capital Gains Tax (CGT) if they hold their investment units for a period of at least four years.

If an investor decides to sell their investment units within four years from their purchase, any gains (return) made on the investment shall be subject to CGT per the current Tax Law.

WHT of 10% to 25% will be applicable on Cash Dividends.

Moreover, with effect from July 01, 2016, Capital Gains on redemption of units by Individual, AOP and Company would be taxed at the rate of :

  • Individual or AOP: 12.5% if capital gains is more than the dividend, 10% if capital gains is less than the dividend – for stock funds. 10% for Money Market Fund, Income Fund or any other fund
  • Company: 12.5% if capital gains is more than the dividend, 10% if capital gains is less than the dividend – for stock funds. 25% for Money Market Fund, Income Fund or any other fund

No CGT would be applicable if the units of the funds are purchased before 1st July 2012.  Bonus Units are subject to withholding tax at a rate of 5% where applicable.