Capital Gains Tax Collection Rises to Rs 380 Million in Kartik, but Overall Fiscal Trend Shows Deep Contraction

Nepal’s stock market has delivered mixed signals in the first four months of the fiscal year 2082/83, with the month of Kartik showing a temporary improvement in revenue despite an overall downward trend. According to CDS & Clearing Limited (CDSC), the government collected Rs 380.59 million in Capital Gains Tax (CGT) during Kartik — a notable rise compared to Asoj’s Rs 243.6 million. The increase came largely on the back of a mild rebound in the NEPSE index, which encouraged short-term profit booking among investors.

CGT Collection Rose After Market Stabilized in Kartik

Long-term individual transactions contributed Rs 127.1 million, while short-term trades — typically taxed at a higher rate — generated Rs 163.5 million. Institutional traders added Rs 89.8 million to the government treasury. The dominance of short-term tax revenue indicates that many investors opted to exit positions quickly to secure profits as the market inched upward.

NEPSE, which had closed at 2487.17 points at the end of Asoj, climbed to 2540.57 points by the final trading day of Kartik. The 53-point recovery, although moderate, was enough to trigger profit-taking, which directly boosted CGT collection.

Market analysts describe Kartik’s improvement as a “technical rebound” rather than a signal of a long-term bullish trend. The after-effects of the youth-led GenZ movement, combined with macroeconomic uncertainty, continue to dampen investor confidence and weaken transaction volumes.

First Four Months Show Sharp Decline Compared to Last Fiscal Year

Despite Kartik’s improvement, the broader picture remains concerning. Between Saun and Kartik of the current fiscal year, the government has collected only Rs 3.38 billion in CGT — a figure sharply lower than last year’s Rs 8.20 billion collected during the same period.

Breakdown of CGT Collection (FY 2082/83)

• Saun: Rs 2.15 billion

• Bhadra: Rs 601 million

• Asoj: Rs 243 million

• Kartik: Rs 380 million

Saun’s exceptionally high collection was driven by heavy profit-taking early in the fiscal year, after NEPSE briefly showed signs of recovery. But since then, trading activity has slowed drastically.

Comparison with Last Fiscal Year Shows a 60% Contraction

Last year’s first four months saw:

• Saun: Rs 4.27 billion

• Bhadra: Rs 2.57 billion

• Asoj: Rs 586 million

• Kartik: Rs 758 million

The contrast is stark — every month this year has underperformed, with Kartik’s collection falling 50% lower than last year’s Kartik figure of Rs 758 million.

This deep contraction suggests:

• The market has fewer active traders than last year.

• Profit-taking opportunities have shrunk due to muted price growth.

• Economic uncertainty is keeping both retail and institutional investors defensive.

• Liquidity pressure in the banking system may have reduced investors’ ability to deploy funds.

• Regulatory and political instability after the GenZ protest has made investors cautious.

Stock Market Under Stress Despite Temporary Uptick

Although NEPSE’s 53-point rise in Kartik is positive, the increase is insufficient to reverse the declining trend in investor participation. Trading volumes — a critical driver of CGT — remain far below last year’s levels. This shows that the Kartik tax rise is more of a short-term correction rather than a sustained improvement.

Market participants also highlight that many investors have shifted to fixed-income instruments, attracted by higher interest rates amid rising inflation and slow credit expansion. This shift has pulled liquidity away from the stock market.

Why CGT Collection Matters for the Government

Capital Gains Tax is one of the most important sources of non-tax revenue for Nepal. When the stock market is active, the government enjoys a steady inflow of funds. The steep decline this year indicates:

• Reduced fiscal intake, adding pressure on the government budget.

• Lower investor sentiment, signaling weaker economic confidence.

• Diminished investment activity, which affects overall capital market growth.

If the declining trend continues, it could have long-term implications for Nepal’s capital market development.

Understanding the CGT Structure

Nepal’s Capital Gains Tax on stock transactions is calculated on the net profit earned by investors:

• Long-term (held more than 1 year): 5%

• Short-term (sold within 1 year): 7.5%

• Institutional investors: 10%

Investors do not pay CGT if no profit is made. Therefore, low CGT revenue is a direct indicator of lower profitability and fewer successful exits in the market.

While Kartik showed a welcome improvement in CGT collection, the broader trend remains declining and fragile. Compared to last fiscal year, Nepal’s capital gains tax revenue has contracted massively, reflecting a cautious market battling uncertainty on multiple fronts. Unless investor confidence revives and the market demonstrates stronger upward momentum, CGT revenue is unlikely to return to last year’s levels.