Capital Gains Tax Collection Sees Sharp Decline Due to Reduced Share Trading

The government's capital gains tax (CGT) collection from share transactions saw a sharp decline over the past month due to reduced stock trading activity. According to CDS and Clearing (CDSC) Limited, the government collected Rs 586.5 million in CGT between mid-September and mid-October, a significant drop compared to Rs 4.23 billion collected in the first month of the current fiscal year (mid-July to mid-August). The collection had already dropped to Rs 2.57 billion during mid-August to mid-September.

Stockbrokers attributed the decline to a substantial reduction in share trading volume and the closure of the secondary market during the Dashain holidays. Despite the implementation of a flexible monetary policy by Nepal Rastra Bank, which drove stock turnover to a record high of Rs 29.95 billion on August 15, trading volumes fell sharply, reaching as low as Rs 3.06 billion last month. However, market capitalization increased by Rs 258 billion during the review period, rising to Rs 4.361 trillion by mid-October.

Despite the overall decrease, CGT collection last month was higher than during the same period last year, which saw Rs 219.5 million collected. Individual investors are required to pay CGT at rates of 5% or 7.5%, depending on how long they hold their shares, while institutional investors are subject to a 10% CGT on capital gains.