CGT collection from share trading declined to Rs 2.57 billion last month with a massive drop in stocks value

Govt collected CGT worth Rs 6.814 billion from share market during mid-July and mid-September

KATHMANDU, Sept 24: The government collected capital gains tax (CGT) worth Rs 2.57 billion from share transactions in one month during mid-August and mid-September.

Although the secondary market witnessed a massive fall of 11 percent (over 300 points) in its index last month, the government was able to collect a notable amount of capital gains tax during the period. According to stockbrokers, investors who sold their scrips to book their profits from abnormal surge in the shares prices in the previous months contributed significantly in the collection of the tax revenue.

The CGT collected last month was however 39 percent less than the amount collected in the previous month. During mid-July and mid-August, the government collected Rs 4.23 billion under the heading.

After witnessing a bullish trend for over a month, the share market went through a bearish trend in the review month. As a result, the Nepal Stock Exchange (NEPSE) came down to 2,688.53 points from over 3,000 points.

Of the amount collected in capital gains tax in the review month, a total of Rs 733.9 million was collected from investors engaged in long-term trade who held the shares for over a year. Likewise, Rs 1.53 billion was collected from short-term investors, according to the CDS and Clearing Limited.

Individual investors are liable to pay CGT of 5 percent or 7.5 percent, depending on the duration that the investors hold shares before they take them for transactions. The individuals who sell the stocks they hold within one year from the purchase date are considered as short-term investors who are liable to pay CGT of 7.5 percent, while those who sell after one year are categorized as long-term investors who are subjected to 5 percent CGT. The institutional investors are liable to pay 10 percent tax on their capital gains. 

The amount of the CGT collection depends on the market capitalization which measures an average shares value of companies listed in the secondary market. The market capitalization as of mid-September this year stood at Rs 4.2749 trillion, a drop of Rs 49 billion compared to the previous month.

Despite a drop in share values last month, investors however earned a cumulative of Rs 609 billion in the share trading during the first two months of the current fiscal year. The NEPSE recorded the market capitalization at Rs 3.666 trillion as of July 15, the last day of FY 2023/24. In aggregate, the government collected CGT worth Rs 6.814 billion in the first two months of the current fiscal year.

NEPSE cautions investors to properly assess risk before injecting money in shares

Nepal Stock Exchange (NEPSE) has cautioned investors not to rely solely on explanations of self-claimed stock analysts while injecting their money in the secondary market.  

Issuing a public notice on Monday, the NEPSE cautioned investors not to make their decisions for investment by just relying on the analysis and discussions created on social media including Facebook, Twitter and Club House. “As these might land the investors in bigger risks, they have to assess the reality themselves while investing in shares,” reads the NEPSE issued notice.

At a time when big investors are suspected to be involved in unethical practices to manipulate the share prices in the secondary market to take undue benefits, the frontline regulator has urged the investors to take precautionary measures.