April 17: The fluctuations in the capital market has influsnced the capital gains tax collected by the government from the market. As the last four months of the current fiscal year (FY) 2080/81 were relatively stable, data show that the government collected capital gains tax better than the previous months.

In the first nine months of the current fiscal year, the government collected Rs 3.79 billion in capital gains tax. Notably, during the last four months alone, approximately 70 percent of this total amount was collected, according to the data provided by CDS and Clearing Limited (CDSC). 

Comparative analysis of the monthly review of the data shows that the government collected capital gains tax of Rs. 972.2 million in the Nepali month of Magh (mid-January to mid-February) of the current year. This is more than other months. In the same month, the Nepal Stock Exchange (NEPSE) index soared to over 2, 200 points.

In the previous month of Poush (mid-December to mid-January), the government had also collected attractive capital gains tax. According to CDSC, the government collected more than Rs 743.9 million in capital gains tax was collected in the review month as the capital market index increased from 1,994.60 points to over 2,221 points.

According to the data, the share market index the dropped to 2,215 points in the following month. Despite the fluctuations in the two months, the market remained positive, so investors made profits.

According to the existing legal system, investors in the secondary market of securities have to pay capital gains tax up to a maximum of 10 percent if they make a profit. Institutional investors have to pay 10 percent tax and individual investors have to pay a maximum of 7.5 percent tax.

According to CDSC, in the nine months of the current year, the government collected more than Rs 453.88 million from institutional investors and more than Rs 333.6 billion from individuals.

While the government is collecting millions of rupees monthly in tax from the capital market, investors complained that the capital gains tax imposed by the government is quite high. They have also been urging the government to reduce the tax rate.

"To attract institutional investors to the capital market, there should be a discount on CGT," said Tara Prasad Fullel, acting president of the Share Investors Association, adding, "In the case of individual investors, 5 percent for short-term and 3 percent for long-term profit tax should be maintained."