KATHMANDU, Nov 22: The government collected Capital Gains Tax (CGT) of Rs 758.7 million from share transactions in the past one month, which was Rs 172.2 million more than the amount collected in the previous month.
According to the records maintained by the CDS and Clearing (CDSC) Limited, a subsidiary of Nepal Stock Exchange (NEPSE), the government’s revenue generated under this heading during mid-October to mid-November this year was around nine times more than the amount collected during the same period last year when the government collected CGT of Rs 84.10 million.
The increased CGT collection was due to an increase in trading volume along with an increase in the market prices of shares. According to the Nepal Stock Exchange, the total turnover of shares was worth Rs 102.45 billion in the secondary market last month. Likewise, the market capitalization rose to Rs 4.376 trillion from Rs 4.361 trillion, which gave the share investors with capital gains of more than Rs 15 billion.
Why Ncell paid the CGT?
Individual investors are required to pay CGT at the rates of 5 percent or 7.5 percent, depending on the duration that they 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 are required to pay 5 percent in CGT. The institutional investors are liable to pay a 10 percent tax on their capital gains.
According to stockbrokers, flexibility shown by banks to provide loans against shares has helped increase transactions at the secondary market of late, which gave the government with more revenue collection in the CGT.
Nepal Rastra Bank, through the monetary policy for the current fiscal year, has adopted a lenient policy in margin lending. As a result, banks and financial institutions (BFIs) extended their lending against shares as collateral by 17.46 percent in the first quarter of the current fiscal year. As of now, the BFIs have provided loans of Rs 105 billion under the heading.
Meanwhile, the government collected a total of Rs 8.16 billion in CGT during mid-July and mid-November this year. The amount was only Rs 1.15 billion in the same period last year.
