Investors Request Capital Gains Tax Reduction in Upcoming Budget For FY 2081/82

The investment community in Nepal is eagerly awaiting the presentation of the national budget for the fiscal year 2081/82 by the Honorable Finance Minister on Jestha 15, 2081. Investors are hopeful that the new budget will include provisions that support and boost the capital market sector.

Currently, the Securities Board of Nepal mandates a withholding tax on capital gains from securities listed on the Nepal Stock Exchange. Investors holding shares for more than 365 days are subject to a 5% tax on capital gains, while those holding shares for 365 days or less are subject to a 7.5% tax.

The investor associations are advocating for key amendments to these tax regulations. They propose that the withholding tax be converted into a final tax and that the Income Tax Act's schedules be revised accordingly. Specifically, they are calling for the short-term capital gains tax (for shares held for 365 days or less) to be reduced to 5% and the long-term capital gains tax (for shares held for more than 365 days) to be reduced to 3%.

These amendments aim to encourage individual participation in share trading and simplify the tax collection and record-keeping processes. The investor community believes that such changes will boost investor confidence, increase trading volumes, and ultimately enhance government revenue through higher tax collections.

Investor groups have repeatedly communicated these requests to the Ministry of Finance through various letters on different occasions. They remain confident that the Ministry is aware of their concerns and the urgent need for reform in the capital market sector.