IRD clarifies that the new income tax provision on shares will not be applicable for non-commercial natural investors

Published On: June 2, 2023 09:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 2: The Inland Revenue Department (IRD) has said the revised tax system on the shares transactions does not hamper the general investors. The IRD made such a revelation after the investors of the secondary market were found to be panicked by the new tax system introduced by the budget for fiscal year 2023/24.  

The government through the budget announcement on Monday has incorporated the earnings of the share investors under the income tax bracket apart from the existing capital gains tax. After the government declared imposing income tax for the earnings of shares transactions, the country’s only stock exchange market lost more than 91 points in the two consecutive days.

Till date, the individual investors are liable to pay capital gains tax of 5 percent or 7.5 percent, depending on the duration that the investors hold shares before they take them for transactions. In the new system, for the leftover amount of the capital gains amount after paying capital gains tax, the investors again need to pay the income tax.

For example if a person gains Rs 3 million from the stocks transaction, given the capital gains tax of 5 percent, the government takes Rs 150,000 as tax under the heading. For the remaining 2.85 million, the investors again need to pay income tax as per the government rule.

The budget has fixed the one percent social security tax for a married couple earning up to Rs 600,000 per year. For annual income between Rs 600,000-Rs 800,000, the income tax of 10 percent is imposed.

Likewise, 20 percent income tax is slapped for annual earnings between Rs 800,000 and Rs 1.1 million. The tax rate is 30 percent for yearly income of Rs 1.1 million-Rs 2 million and it is 36 percent for income above Rs 2 million up to Rs 5 million. A tax rate of 39 percent is slapped on the annual income above Rs 5 million.      

The IRD in this regard issued a statement asking the investors not to panic. “The new provision is applicable only for the commercial investors, but not to the small investors. The existing provision will be applied for the natural investors, who do not carry out transactions for commercial purpose,” reads the IRD release. 

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