Government Collects Over Rs 4.23 Billion in Capital Gains Tax from Share Trading in Just One Month, Surpassing Last Fiscal Year's Total

The government has successfully collected over Rs 4.23 billion in capital gains tax (CGT) from share trading activities within the past month, a figure that surpasses the total CGT collected during the entire previous fiscal year.

According to data from CDS and Clearing Limited, the significant increase in trade volume and market capitalization between mid-July and mid-August of this year resulted in a substantial boost in revenue. This surge comes after the government collected Rs 4.15 billion in CGT throughout the entire fiscal year 2023/24.

The year-on-year growth in CGT collection for the first month of the current fiscal year is remarkable, nearly tenfold compared to the same period last year. In the corresponding period of fiscal year 2023/24, CGT revenue amounted to just Rs 400.80 million.

During this one-month period, the Nepal Stock Exchange (NEPSE) index witnessed an extraordinary increase of almost 1,000 points. Simultaneously, the daily turnover also saw a dramatic rise, surpassing Rs 29 billion from an average of around Rs 2 billion.

CGT collection is closely tied to market capitalization, which reflects the average value of shares of companies listed on the secondary market. By mid-August, market capitalization had soared to Rs 4.765 trillion, a significant increase from Rs 3.666 trillion as of July 15, the last day of fiscal year 2023/24. This indicates that the value of shares held by investors grew by more than Rs 1.099 trillion within the review month.

Individual investors are required to pay CGT at rates of either 5 percent or 7.5 percent, depending on the duration for which they hold shares before selling them. Those who sell shares within one year of purchase are considered short-term investors and are subject to a 7.5 percent CGT, while those who sell after one year are categorized as long-term investors and are liable for a 5 percent CGT. Institutional investors are subject to a 10 percent CGT on their capital gains.