Government collects Rs 2.86 billion in capital gains tax from share transactions

KATHMANDU: In a significant fiscal development, the Nepalese government has successfully collected a staggering Rs 2.86 billion in capital gains tax (CGT) from stock transactions in the first seven months of the current fiscal year.

The data provided by the CDS and Clearing Limited reveals that this revenue was generated from transactions on the Nepal Stock Exchange (NEPSE) spanning mid-July 2023 to mid-February 2024.

Last month alone witnessed a notable surge in revenue collection, with Rs 972 million contributing to the government’s coffers under the CGT heading. This amount marked the highest monthly collection during the specified period.

The records from CDS and Clearing indicate a remarkable 33.66 percent increase in the amount collected from mid-January to mid-February compared to the previous month, reaching Rs 743.9 million.

Short-term investors emerged as the primary contributors to this surge in capital gains tax during the specified period. Individual investors are subject to CGT rates of 5 percent or 7.5 percent, contingent on the duration they hold shares before engaging in transactions.

Short-term investors, those selling stocks within one year of purchase, contributed significantly to the tax collection. On the other hand, long-term investors, holding stocks for over a year, are subject to different tax rates. Institutional investors face a 10 percent tax rate on their capital gains.

The dynamics of the NEPSE market were further highlighted with the latest market capitalization data. Nepal Telecom, boasting a market capitalization of Rs 156.06 billion, secured its position as the largest listed company on NEPSE. Nabil Bank and the Citizens Investment Trust secured the second and third positions, respectively, in terms of market capitalization.

Other prominent companies in the top ten list include Nepal Reinsurance Company, Global IME Bank, Himalayan Reinsurance, NIC Asia Bank, Everest Bank, Nepal Investment Mega Bank, and Nepal Life Insurance.

NEPSE reported a total market capitalization of Rs 3.198 trillion as of the latest data available until Sunday.

This surge in capital gains tax revenue and the continued strong performance of leading companies on NEPSE reflect the robustness of the Nepalese stock market, contributing positively to the country’s fiscal health.

Investors, both individual and institutional, are navigating the market with varying tax implications, and the government’s ability to harness revenue from this sector is indicative of a thriving financial landscape.