Capital gains tax on share trading reduced: 3.5% for long-term and 5% for short-term

Kathmandu. The government has decided to reduce the capital gains tax rate that natural persons must pay on profits from share trading. The Cabinet meeting held on Wednesday decided to reduce the advance tax rate on securities trading, setting it at 3.5 percent for long-term investors and 5 percent for short-term investors.

Government spokesperson and Education Minister Sasmit Pokharel, while announcing the Cabinet decisions, informed that the new tax rate has been set for natural persons on gains from the sale of securities of bodies listed on the Nepal Securities Board.

Under the new arrangement, gains from the sale of securities held for more than 365 days will be subject to a 3.5 percent advance tax. Similarly, gains from the sale of securities held for 365 days or less will be subject to a 5 percent advance tax.

Previously, natural persons holding securities for more than 365 days paid 7.5 percent capital gains tax on profits, while those holding for 365 days or less paid 10 percent.

Accordingly, the tax rate for long-term investors has fallen from 7.5 percent to 3.5 percent, and the tax rate for short-term investors has fallen from 10 percent to 5 percent.

New and old capital gains tax

• More than 365 days: Previously 7.5% → Now 3.5%
• 365 days or less: Previously 10% → Now 5%

For example, if there is a capital gain of Rs. 100,000 from selling shares held for more than 365 days, previously Rs. 7,500 tax would be levied, but under the new rate it will be Rs. 3,500. Similarly, for a profit of Rs. 100,000 in transactions of 365 days or less, the tax that was previously Rs. 10,000 will now be Rs. 5,000 under the new rate.

The government had also included the review of capital gains tax on share trading in its recent action plan for capital market reform. With the latest Cabinet decision, the proposal to reduce the tax rate has received formal approval.