KATHMANDU, March 18: The government collected capital gains tax (CGT) worth Rs 6.44 billion in the first eight months of the current fiscal year (FY), almost half of the amount that the government earned under the same heading in the corresponding period of the last FY.
The massive drop in share transactions has led to the heavy fall in the CGT collection in the review period. According to CDS and Clearing Limited, the government’s revenue collection under CGT stood at Rs 12.16 billion in eight months of FY 2024/25.
The government collects CGT of 7.5 percent on profits earned by short-term investors who sell shares within a year from the date of purchase. Long-term investors have to pay 5 percent on profits from shares held for longer periods.
Institutional investors pay 10 percent CGT on profits earned from share transactions. However, the investment in mutual funds is not subject to any CGT.
CGT collection plummets to Rs 586 million amid trading decline
The heavy decline in share transactions has taken a toll on the government’s revenue collection under the CGT. In the review period this year, total stocks of Rs 102.84 billion were transacted in the Nepal Stock Exchange (NEPSE). The amount was 29.83 percent less compared to Rs 1.146 trillion in the same period of the last FY.
During the review period, the scrips of the finance group witnessed the highest fall of 75.97 percent. Likewise, the transactions of the trading group declined 59.98 percent and that of life insurance declined 50.24 percent.
The records with the CDS and Clearing Limited show that the government’s CGT collection declined 58.54 percent in last month alone. Compared to the earnings of Rs 1.33 billion during mid-February and mid-March of last year, the amount was limited to Rs 551.5 million in the corresponding month this year.
Last month, short-term investors paid CGT of Rs 320.6 million to the government, while the amount generated from long-term investors was Rs 170.6 million. The government collected CGT of over Rs 80 million from institutional investors.
In the first month of the current FY, the government collected CGT worth Rs 2.15 billion, when the NEPSE index crossed 3,002 points. The amount, however, declined successively in the following months due to the impact of the Gen Z movement. CGT collection fell as low as Rs 243.65 million in one month between mid-September and mid-October.
Over the period of eight months, the market index has fallen to 2,812.34 points. The secondary market has started to show some positive response after the successful conduction of the March 5 election.
