KATHMANDU, Oct 21: The revenue collection from capital gains tax (CGT) on share transactions saw a significant drop over the past month due to a decrease in stock trading.
According to the records with the CDS and Clearing (CDSC) Limited, the government collected capital gains tax worth Rs 586.5 million between mid-September and mid-October this year. The amount is only about one-eighth of the revenue collected in the first month of the current fiscal year.
Share transactions during mid-July and mid-August generated Rs 4.23 billion in CGT. Between mid-August and mid-September, however, the CGT collection dropped to Rs 2.57 billion.
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Stockbrokers attributed a substantial decline in the traded volume of shares as the primary reason for the drop in CGT collection over the period. In addition, the closure of the secondary market during the Dashain holidays also impacted CGT collection, said stockbrokers.
Following the implementation of a flexible monetary policy by the Nepal Rastra Bank for the current FY, the daily turnover amount reached a record high of Rs 29.95 billion on August 15. But the transaction declined to a low of Rs 3.06 billion in the past month.
In the review period, the market capitalization rose by Rs 258 billion, according to Nepal Stock Exchange. Market capitalization on September 16, the start of the last fiscal month, was recorded at Rs 4.103 trillion, which rose to Rs 4.361 trillion on October 16.
The CGT collection last month however was higher than the amount collected in the same period last year. Between mid-September and mid-October of FY 2023-24, the CGT accounted for only Rs 219.5 million.
Individual investors are required to pay CGT at the rates of 5 percent or 7.5 percent, depending on the duration that the investors hold their shares before selling. 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 a CGT of 7.5 percent, while those who sell after one year are categorized as long-term investors and required to pay 5 percent in CGT. The institutional investors are liable to pay a 10 percent tax on their capital gains.
