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MP 🇵🇰 🇵🇸
4.2K posts
MP 🇵🇰 🇵🇸
@MP4FMPK
delusions of grandeur suit me just fine. #economy, #investing, #cricket & baba to a 7 year old angel
Karachi, Pakistan Beigetreten Ağustos 2014
411 Folgt5.2K Follower
@AmerSharifOFCL Pahlay hi boldaytay bhai its a loss making corporate 😀
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Many people responding to my previous post asked why I suggested investing only in profit-on-debt options (i.e., debt instruments), which are taxed at higher rates compared to capital gains (taxed at 15% or 25%, depending on the investment type).
Let me explain the reasoning.
If a company has business losses(due to any reason) but also has surplus funds available for investment, investing in debt instruments generates profit on debt, which is treated as income from other sources and taxed under normal tax rules in the same tax year. This is important because such income can be adjusted against business losses.
However, capital gains are treated as a separate block of income, so they cannot be adjusted against business losses. Also, tax deducted on profit on debt is adjustable and can be claimed as a refund, whereas tax on capital gains is final (fixed).
Example:
Suppose a company has:
Business loss: 200 rupees
Profit on debt: 100 rupees
Tax deducted on profit on debt: 20 rupees
In this case:
The 100 profit can be adjusted against the 200 loss
Net taxable income becomes zero
The 20 rupees tax deducted is refundable from FBR.
Now compare this with capital gains:
Capital gain: 100 rupees
Tax deducted: 15 or 25 rupees
In this case:
Tax of 15/25 rupees is final
The 200 rupees loss remains unadjusted
Effectively, you end up paying extra tax of 15/25 rupees.
So, in a loss-making situation, investing in debt instruments can be more tax-efficient despite higher tax rates.
@motasim @Invest_Kardo @MP4FMPK
Amer Sharif@AmerSharifOFCL
Suppose I have PKR 1 billion and want to earn profit only from debt instruments (from a tax perspective) over a period of three months(before 30th June 26), while retaining some flexibility to utilize a portion of the funds for working capital needs of a business. What options are available to maximize profitability in the current scenario, especially when fixed-income yields are rising? -Negotiate with a bank to obtain the highest possible return on a savings account. -Invest in short-term (three-month) T-bills. Note: If liquidated early to meet fund requirements, the resulting gain may be subject to capital gains tax, which I would prefer to avoid. -Enter into a term deposit arrangement with a bank after negotiating competitive rates. Any other viable options? Please share your input for learning and discussion. Plz ignore other options of investment and tax benefits in other cases as we have only option of debt instruments to get only profit on debt from tax planning point of view.
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@AmerSharifOFCL Why pay higher tax on profit on debt when you can get the same underlying risk profile (bank deposit/tbill) with an investment in a money market fund? Tax will be much lower & the money can be withdrawn at any point w/o penalty (that may apply on a bank deposit).
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Suppose I have PKR 1 billion and want to earn profit only from debt instruments (from a tax perspective) over a period of three months(before 30th June 26), while retaining some flexibility to utilize a portion of the funds for working capital needs of a business.
What options are available to maximize profitability in the current scenario, especially when fixed-income yields are rising?
-Negotiate with a bank to obtain the highest possible return on a savings account.
-Invest in short-term (three-month) T-bills.
Note: If liquidated early to meet fund requirements, the resulting gain may be subject to capital gains tax, which I would prefer to avoid.
-Enter into a term deposit arrangement with a bank after negotiating competitive rates.
Any other viable options?
Please share your input for learning and discussion.
Plz ignore other options of investment and tax benefits in other cases as we have only option of debt instruments to get only profit on debt from tax planning point of view.
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@MP4FMPK The real problem is that most HR departments don't do it either. That's the biggest travesty.
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If salaried, speak to HR and provide details of:
VPS investment
Advance tax on internet/credit card etc
Charitable donations (recognised)
HR can then adjust tax on salary (but are not required to) and you can avoid refund delays.
Section 149(1) + rule 42 of the ITO
Amer Sharif@AmerSharifOFCL
If you are a salaried person in Pakistan, your taxes are deducted at many different points during the year, and each deduction is properly recorded in the FBR system. For example: Monthly salary: Your employer deducts withholding tax every month and deposits it directly with the government under section 149. Vehicle token Taxes: These taxes are paid through proper challans and are fully traceable and relevant collecting authority deposits the same into Govt treasury under section 231B/234. Utility bills: Electricity, mobile, telephone, and internet bills include withholding taxes that are automatically deducted and reported/deposited to FBR under different sections of income tax ordinance. Foreign transactions: Advance tax under section 236Y is also deducted at source. And there are no of other withholding tax transactions. Since all these taxes are collected in advance, submitted electronically, and in most cases appear in the filer’s IRIS account with proper CPR numbers, the government already knows exactly how much tax a salaried person has paid. Their own system verifies everything. Because of this, there should be no reason to delay refunds or force taxpayers through long application submission procedures—especially when salary is the only source of income. The system already holds all the data; it simply needs to match the tax paid with the actual tax due and automatically issue the refund to the bank account provided in the taxpayer’s FBR profile—just like many other countries do. But in Pakistan, instead of automatic refunds, taxpayers still have to file separate refund applications, wait for months or even years, and deal with unnecessary hurdles. With such a complete and data-rich system already in place, what we truly need now is transparency, automation, and an efficient refund mechanism, so taxpayers receive what is rightfully theirs without delays. @FBRSpokesperson @CMShehbaz Let’s start this year by implementing automatic refunds for salaried individuals whose only source of income is salary, and then gradually expand it to everyone.
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@ravijagasia HR isnt required to adjust the taxes but they can under the law (as i understand it as a non tax person).
Isnt adjusting at source better than paying the tax, filing after a year & then waiting to get a refund?
Time value of money bhi kuch cheez hoti hay
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@ednistrator 500K annual tax means effective rate is in the range of 13-14%.
So if you invest 750K in VPS that should save you about 100K in taxes
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I've tried that, it's like 2000 pkr/year
MP 🇵🇰 🇵🇸@MP4FMPK
If salaried, speak to HR and provide details of: VPS investment Advance tax on internet/credit card etc Charitable donations (recognised) HR can then adjust tax on salary (but are not required to) and you can avoid refund delays. Section 149(1) + rule 42 of the ITO
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@NajamAli2020 Boss, total revenue in FY25 was 18T (12.7 tax + 5.3 non tax). After provincial transfer it was 9.9T. Int exp was 8.9T.
Comparing just tax collection to int exp is incomplete as sbp profit is part of the gov’s borrowing structure.
But I agree with you that it’s way too high!
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There is no doubt the rapid rise in debt is alarming given the narrow revenue base. A fiscal reset is definitely required.
However its better calculate interest expense net of sbp profit given that ~13 trillion in gov borrowing is financed at a cost of 1% or less through OMOs.
Najam Ali@NajamAli2020
OUR FISCAL NIGHTMARE FROM MICHAEL BURRY’S LENS Michael Burry warned: The moment your interest payments exceed tax revenue, your country becomes a Ponzi scheme. Welcome to FY26: - Federal interest payments: Rs 8.3–8.8 trillion - Total federal net revenue (after NFC): Rs 7.5–8.0 trillion Let that sink in: We can’t even pay interest without borrowing more. The federal government is now: - Borrowing to pay interest - Borrowing to run the state - Borrowing to survive It is not sustainable.
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@BaigShayan1234 Your welcome!
Net interest expense at 6 trillion is still too high but yes this a better way to look at it.
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@MP4FMPK Effective interest expense burden lands somewhere around 6 Trillion Rs net of SBPs profits.
Good point Sir, Thank you for different perspective. :)
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@pak_investor OMOs are of two types: mop up and injection. The mop up is to drain liquidity while the injection is to add liquidity.
Gov borrowing directly from the SBP isnt allowed so instead the SBP lends to banks (thru OMO injections) who in turn lend to the gov thru tbill/pib auctions.
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Market outlook with @shuja_qureshi & Shahbaz on @NuktaBusiness
youtu.be/BgTdkAUMwX8?si…
#PSX #KSE100
YouTube
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FX reserves yet to feel the impact of a higher trade deficit during Jul to Oct & a 500 mn eurobond payment in Sep.
Next few weeks will be crucial in determining whether we have inflows to offset higher imports.
#SBP #PSX #KSE100
MP 🇵🇰 🇵🇸@MP4FMPK
A trade deficit in itself means nothing. As long as imports are contributing to future productivity & you can fund the gap with mostly non debt dollars. If there are no inflows to offset higher import payments then reserves should feel the impact during Nov. 2/3
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@AhsanYChawla So far yes remittances are enough to bridge the goods deficit, unfortunately we also run a services & primary income deficit of around 1 billion per month. That has to be financed too.
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@MP4FMPK It does seem like remittances are consistently high enough to bridge the gap. What's your expectation?
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@ammarnadeem2662 Yes pbs and sbp data is calculated differently, this is why I was talking about reserves rather than the CAD.
If we assume payments against imports with a 4-8 week lag then reserves should drop during Nov.
If reserves arent dropping then there are inflows we dont know about.
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@MP4FMPK @StutterFreak Do the funds are short of cash??? Not so
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@HussnainRafique @StutterFreak Thats what our history tells us.
What are your reasons for an impending bust?
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@StutterFreak @MP4FMPK People always become optimstc or bet that this time Pakistan wil come out of its boom and bust ecnomic cycle but disapoint wth big losses, these days i advise my frnds to wait as much requird when every compny wil be again at its lowest PE and wil multiply in next boom cycle
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@StutterFreak Funds buy when they have inflows and sell when they have outflows. Most funds will still be 90%+ invested in equities.
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@MP4FMPK Why are mutual funds selling then? Non stop. Today MARI was pumped to keep index up... time is ticking... macroeco data is not improving anymore
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