SPECULATION BUSINESS [19]

A taxpayer carrying on a “speculation business”, shall treat the same as a distinct and separate business from any other business carried on by the taxpayer. Incomes, gains or losses from a speculation business shall be kept separate from other business incomes. 
Incomes from business are to be presented and separately dealt with under the following sub-heads: 
1. Income from non-speculation business; and 
2. Income from speculation business. 
“Speculation business” means a business in which a contract for the purchase and sale of any commodity (including stocks and shares) is periodically or ultimately settled otherwise than by actual delivery or transfer of the commodity. 
However, the following businesses are not included in “speculation business” [19(2)] : 

1. A business in which a contract is entered into by a person to guard against loss through future price fluctuations in respect of other contracts entered into by him for actual delivery of goods. 
2. A business in which a contract in respect of stocks and shares is made by a dealer or investor to guard against loss in his holdings through price fluctuations. 
3. A business in which a contract is entered into by a member of a forward market or a stock exchange in any transaction of ‘jobbing’ or ‘arbitrage’ to guard against loss which may arise in the ordinary course of his business. 

“Jobbing” 
is the function of buying and selling financial securities on the stock market by dealer who acts as a principal in making a market In these securities. 

“Arbitrage” 
is the buying and selling of products, financial securities or foreign currencies between two or more markets in order to take profitable advantage of any differences in the price quoted in those markets. 

There are many benefits of filing income taxes in Pakistan but most of the salaried persons don’t know them or are too much afraid of Tax Returns and FBR. Most of the salaried persons are engaged in multinational industries or factories that deduct the income tax at source (They get their salary after tax deduction) yet they don’t have NTN and don’t file taxes. These people can enjoy the maximum benefit of filing taxes as they are already paying their taxes.

FBR has made it mandatory for all salaried employees (government and private) having taxable income to file their income tax returns. They have also started sending random letters to people to register for NTN and file income statement as well as wealth statement. Since people are reluctant to get NTN and file taxes in Pakistan, government has made new rules so that filers enjoy the benefits while non-filers have to pay extra charges. This is just the beginning. The charges will keep on increasing for non-filers. So, a wise decision will be to get registered with FBR as soon as possible and enjoy the benefits.