The government collected Rs 6.44 billion in capital gains tax (CGT) during the first eight months of the current fiscal year—nearly half of what was generated in the same period last year.
The significant drop is largely attributed to a steep decline in share transactions. Data from CDS and Clearing Limited shows that CGT revenue stood at Rs 12.16 billion during the corresponding period of the previous fiscal year, highlighting the scale of the downturn.
Under current tax rules, short-term investors who sell shares within a year pay 7.5 percent CGT on their profits, while long-term investors are taxed at 5 percent. Institutional investors are subject to a higher rate of 10 percent, whereas investments in mutual funds are exempt from CGT.
The slowdown in trading activity at the Nepal Stock Exchange has been the main factor behind the falling tax collection. During the review period, total transactions amounted to Rs 102.84 billion—nearly 30 percent lower than the Rs 1.146 trillion recorded in the same period last year.
Sector-wise, the finance group saw the sharpest decline in trading, dropping by nearly 76 percent. The trading sector followed with a fall of almost 60 percent, while life insurance transactions decreased by over 50 percent.
Monthly data further illustrates the slowdown. CGT collection dropped by 58.54 percent in just one month, falling from Rs 1.33 billion last year to Rs 551.5 million this year during the mid-February to mid-March period. Of this, short-term investors contributed Rs 320.6 million, long-term investors Rs 170.6 million, and institutional investors over Rs 80 million.
At the beginning of the fiscal year, CGT collection was relatively strong, reaching Rs 2.15 billion when the NEPSE index surpassed 3,002 points. However, revenues declined steadily in the following months, influenced in part by market disruptions linked to the Gen Z movement. At one point, monthly CGT collection fell to as low as Rs 243.65 million.
Over the eight-month period, the NEPSE index dropped to 2,812.34 points. Despite the overall downturn, the secondary market has recently shown signs of recovery following the successful conduct of the March 5 election.
