The Pakistan Stock Exchange (PSX) has recommended the government to reduce the rate of withholding tax (WHT) on the gross income earned on margin financing (MF) transactions from 10 percent to 2.5 percent. The PSX in its proposals for the upcoming budget for the fiscal year 2021-22 said that MF facility is available to all Trading Rights Entitlement Certificate (TREC) holders against net ready market purchases of their clients and proprietary positions. The National Clearing Company of Pakistan Limited (NCCPL) provides a system to MF participants for recording and settlement of ME transactions, with financing terms and conditions pre-determined by the Margin Finance and Margin Financier. Margin financing facility is made available only in eligible securities notified by the Securities and Exchange Commission of Pakistan (SECP). Presently, the rate of tax on gross income of the Financier is 10 percent without deduction of any expenditure to earn such income, whereas, in most cases the funds are borrowed from financial institutions for such ME transactions. The cost involved in margin financing includes financing cost payable to financial institutions, trading, clearing and depository charges and other administrative costs which means that the amount deducted as advance tax will not be fully adjusted against the tax liability of most brokers, resulting in claims for tax refunds that are not time bound.