Revenue from capital gains tax (CGT) on share transactions has experienced a significant decline over the past month, attributed to a drop in stock trading activity.
Data from CDS and Clearing (CDSC) Limited shows that the government collected Rs 586.5 million in CGT between mid-September and mid-October this year, amounting to just one-eighth of the revenue collected in the first month of the current fiscal year.
During the period from mid-July to mid-August, CGT revenue reached Rs 4.23 billion, but this figure fell to Rs 2.57 billion between mid-August and mid-September. Stockbrokers have identified a substantial decrease in traded share volume as the main factor behind the drop in CGT collection, with the closure of the secondary market during the Dashain holidays further impacting revenue.
Despite the Nepal Rastra Bank’s implementation of a flexible monetary policy, which saw daily turnover reach a record high of Rs 29.95 billion on August 15, trading volumes plummeted to a low of Rs 3.06 billion in the past month.
However, market capitalization increased by Rs 258 billion during this period, rising from Rs 4.103 trillion on September 16 to Rs 4.361 trillion on October 16, according to the Nepal Stock Exchange.
Notably, the CGT collected last month was higher than the amount recorded during the same period last year, which was only Rs 219.5 million for FY 2023-24.
Individual investors are taxed at rates of 5% or 7.5% based on their shareholding duration. Short-term investors, selling within one year of purchase, face a CGT of 7.5%, while long-term investors pay 5%. Institutional investors are subject to a 10% tax on capital gains.
