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The income of Mutual Funds will be exempt from Income Tax under clause 99 of Part I of Second Schedule of the Income Tax Ordinance 2001 (Ordinance), if not less than 90% of the income of the year, as reduced by realized and unrealized capital gains is distributed amongst the Unit Holders as dividend.

Withholding tax on Profit is also exempt in case of Mutual Funds under Clause 47B of Part IV of Second Schedule of Ordinance.

The information set forth below is included for general information purpose only. In view of the individual nature of tax consequences, each investor is advised to consult with his tax advisor with respect to the specific tax consequences to him/her of investing in mutual funds.

Note: As per Tenth schedule of ITO where the tax is required to be deducted under the provision of Ordinance from person not appearing in the Active Taxpayer List (ATL), the rate shall be increased by hundred percent.

(i) Tax on Dividend

As per section 150 of ITO, holders of mutual funds will be subject to Income Tax on Dividend Income received from a mutual fund as under:

Tax Payer

Mutual Fund

Company

15%

Individual/AOP

15%

The rate of tax so specified will be the final tax and the payer (Trustee) will also be required to withhold the amount of tax at source.

Unit Holders who are exempt from income tax may obtain exemption certificate from the Commissioner of Income Tax and on the basis of the exemption certificate, income tax will not be withheld.

(ii) Capital Gains Tax (CGT)

As per section 37A of ITO, holders of mutual funds will be subject to CGT on capital gains earned on sale of mutual fund or collective investment scheme, as under:

Tax Payer

Stock Fund

Money Market Fund, Income Fund or any other Fund

If dividend receipts of fund are more than capital gains

If dividend receipts of fund are less than capital gains

Company

10%

12.5%

25%

Individual/AOP

10%

12.5%

10%

  • No Capital gain tax shall be deducted if the holding period of the security is more than four years.
  • Capital gain or loss arising on the disposal of any security shall be computed on the basis of First In First out (FIFO) inventory accounting method.

The Asset Management Company shall withhold the tax and deposit the same in Government Treasury within 7 days of its deduction. There will be no CGT for holding period more than four years (long-term investments).

Unit Holders of Atlas Funds, other than a company, shall be entitled to a tax credit under section 62 of the Income Tax Ordinance 2001 on purchase of new Units. The amount on which tax credit will be allowed shall be lower of:

(a) amount invested in purchase of new Units; or,

(b) Twenty percent of the taxable income of the Unit Holder; or

(c) Rupees Two Million (Rs 2,000,000)

The tax credit will be calculated by applying the average rate of tax of the Unit Holder for the tax year. If the Units so acquired are disposed within twenty four months, the amount of tax payable for the tax year in which the Units are disposed shall be increased by the amount of credit allowed.

Units held by Muslim citizens of Pakistan and all those coming under the definition of Sahib-e-Nisab, shall be subject to Zakat at 2.5% of the value of the Units under Zakat and Ushr Ordinance,1980, (XVII of 1980), except those exempted under the said Ordinance. Zakat will be deducted at source from the redemption proceeds. Above deduction will not be made if Unit Holder provides declaration (Copy of Zakat Affidavit- Form CZ50) to the Management Company that he/she is not obliged to pay Zakat as per their mentioned Fiqh on the respective type of assets to any extent.