Govt withdraws its decision to increase CGT on shares

KATHMANDU, June 6: The government has withdrawn its decision to revise the capital gains tax (CGT) threshold on the sale of bonus and rights shares following the criticisms from various quarters.

The Inland Revenue Department (IRD) last week had issued a directive to charge CGT as per the Income Tax Act 2002, according to which, the investors needed to pay capital gains tax on the sale of rights and bonus shares on the basis of the market value of the company’s shares.

Following the IRD’s directive on calculation method, Nepse had started imposing the CGT on the sale of bonus and right shares as per the new calculation method.

But the share investors had staged protest demanding the government revoke its decision saying that they, as per the new calculation formula, would have to pay the capital gains tax even if they bear loss while selling their shares.

After the share investors boycotted the trading the stock market had come to a complete halt on Tuesday.

Ministry of Finance on Wednesday wrote to the IRD directing them to calculate the CGT using the previous formula.

The government will now calculate CGT using the previous formula, according to which, the investors used to pay 5 percent of CGT on the sale of the bonus and right shares calculated after reducing the price gained from selling the shares from the adjusted price of such shares.

According to the new calculation method, the CGT would be calculated after reducing the market price of bonus and right shares from the face value.