IRD makes it clear that natural persons who invest for non-commercial purposes will not be subject to the new income tax provision on shares

KATHMANDU: The revised tax code for stock transactions, according to the Inland Revenue Department (IRD), does not disadvantage regular investors. The IRD made this revelation in response to the secondary market investors’ apparent panic over the new tax structure included in the budget for the fiscal year 2023–2024. .

In addition to the existing capital gains tax, the government included the share investors’ earnings under the income tax bracket in its budget announcement on Monday.

The country’s sole stock exchange market lost more than 91 points over the course of two days after the government announced that it would be levying income tax on share transaction earnings.

According to the amount of time that individual investors have held shares before selling them, they are currently responsible for paying capital gains tax at a rate of either 5 percent or 7 point 5 percent. Investors will now be required to pay income tax once more on any remaining capital gains amount under the new system after capital gains tax has been paid.

For instance, if a person makes a profit of Rs 3 million from the sale of stocks, the government will deduct Rs 150,000 as tax under this heading due to the capital gains tax of 5%.

The investors must once more pay income tax in accordance with government regulations for the remaining 2.85 million.

For married couples earning up to Rs 600,000 annually, the budget has set the one percent social security tax. Income tax of 10% is levied for yearly income between Rs. 600,000 and Rs. 800,000.

The same goes for annual income between Rs 800,000 and Rs 1,000,000, which is subject to a 20% income tax.

For annual income between Rs. 1 and 2 million, the tax rate is 30%; for income between Rs. 2 and Rs. 5 million, the rate is 36%. The annual income over Rs 5 million is subject to a 39 percent tax rate. .

Regarding this, the IRD issued a statement pleading with the investors not to lose their cool. “The new rule only applies to commercial investors; it does not apply to small investors.

For natural investors who don’t engage in transactions for profit, the current provision will be in effect, according to an IRD press release.