Capital Gains Tax on Shares in Nepal: Rates, WACC Calculation & Rules

When you liquidate your shares on the Nepal Stock Exchange (NEPSE) through your broker’s Trade Management System (TMS), the final payout deposited into your bank account is always lower than your gross turnover. Aside from exchange regulatory charges and brokerage fees, the single largest deduction on a profitable trade is Capital Gains Tax (CGT).

For beginners learning how to start investing in the Nepali stock market, understanding how CGT is assessed, tracked, and deducted is essential for managing net returns. This guide breaks down Nepal’s current CGT tax brackets, explains the 365-day holding period rule, walks through an exact mathematical calculation, and illustrates the role of MeroShare’s WACC and My Holding features.

What is Capital Gains Tax (CGT) in the Nepal Stock Market?

Capital Gains Tax (पुँजीगत लाभकर) is a direct tax levied by the Government of Nepal (through the Inland Revenue Department) on the net profit realized from the disposal of capital assets, including listed equities, debentures, and mutual funds. Under the Income Tax Act of Nepal, you are taxed solely on the gain (the profit earned), not on the total capital returned.

If you purchase 100 shares of a commercial bank at Rs. 200 per share (Total Cost: Rs. 20,000) and later sell them at Rs. 350 per share (Gross Proceeds: Rs. 35,000), your taxable capital gain is calculated after adjusting for legitimate buying and selling expenses. If you execute a sale at a loss, no CGT is owed.

Current Capital Gains Tax Rates in Nepal (Individual vs Institutional)

Nepal employs a differentiated tax framework designed to incentivize long-term ownership over speculative intraday or rapid-turnaround swing trading. Tax rates vary depending on whether the legal owner of the Demat account is a natural person (individual) or an artificial legal entity (corporate institution).

Investor Classification	Holding Duration	Applicable CGT Rate
Individual (Resident Natural Person)	Short-Term (365 days or less)	7.5% on net capital gain
Individual (Resident Natural Person)	Long-Term (More than 365 days)	5.0% on net capital gain
Institutional / Corporate (Resident)	Irrespective of holding period	10.0% on net capital gain
Non-Resident Investor (Individual / Entity)	Irrespective of holding period	25.0% on net capital gain

Note: Tax policies can be updated through annual government budgets and Finance Acts passed by the Ministry of Finance. Investors should periodically confirm current provisions with the Inland Revenue Department (IRD) or registered tax consultants.

Short-Term vs Long-Term Investors: 365-Day Holding Period Rule

The classification of an individual investor as “short-term” or “long-term” depends on an exact 365-day calendar cutoff. This period is tracked by CDS and Clearing Limited (CDSC) using the settlement date of the initial acquisition against the settlement date of the eventual disposal.

Short-Term Holding (≤ 365 Days): If you sell your shares within 365 calendar days of acquisition, your profit is subject to the higher 7.5% tax rate. This tier commonly applies to active swing traders, momentum investors, and people who immediately sell primary market shares following an Initial Public Offering (IPO).
Long-Term Holding (> 365 Days): If you hold your shares for 366 days or longer before liquidating, the tax drops to 5.0%. This lower rate is designed to encourage patient retail investment in sound companies.

How CDSC Determines Holding Under FIFO

When you accumulate shares of the same company at different times (for instance, 50 shares via an IPO three years ago, 100 shares from secondary trading six months ago, and 20 shares from a recent bonus issue), CDSC uses the First-In, First-Out (FIFO) accounting method.

When you execute a partial sell order, the system assumes the oldest acquired units are sold first. If you sell 50 shares from the scenario above, CDSC matches them against your initial three-year-old IPO allotment, qualifying the transaction for the lower 5.0% long-term CGT rate.

How CGT is Calculated on NEPSE Share Sales (With Example Formula)

Calculating your net tax liability requires working through gross values, mandatory regulatory deductions, and net purchase costs. The fundamental accounting formula used across brokerage back-office clearing systems is:

Net Sale Amount = Gross Sale Amount - Broker Commission - SEBON Regulatory Fee (0.015%) - DP Transaction Charge (Rs. 25)
Total Cost of Sold Shares = Weighted Average Cost of Capital (WACC) × Quantity Sold
Net Capital Gain = Net Sale Amount - Total Cost of Sold Shares
CGT Payable = Net Capital Gain × Applicable Tax Rate (5% or 7.5%)

Practical Calculation Example

Consider an individual investor selling 100 shares of a hydropower company at Rs. 500 per share. The investor held the shares for 400 days (qualifying for the 5.0% long-term rate). The approved WACC purchase cost recorded in MeroShare is Rs. 250 per share.

Gross Turnover: 100 × Rs. 500 = Rs. 50,000.00
Broker Commission: Based on the standard NEPSE slab for Rs. 50,000 (0.40%):
Rs. 50,000 × 0.004 = Rs. 200.00
SEBON Regulatory Fee: 0.015% of gross turnover:
Rs. 50,000 × 0.00015 = Rs. 7.50
DP Transaction Charge: Flat per-company transfer charge = Rs. 25.00
Net Sale Amount Realized:
Rs. 50,000 – (Rs. 200 + Rs. 7.50 + Rs. 25) = Rs. 49,767.50
Total Purchase Cost (WACC Basis): 100 × Rs. 250 = Rs. 25,000.00
Net Capital Gain:
Rs. 49,767.50 – Rs. 25,000.00 = Rs. 24,767.50
Capital Gains Tax (5% Long-Term):
Rs. 24,767.50 × 0.05 = Rs. 1,238.38

After factoring in all costs and settling the Rs. 1,238.38 tax, the net sum sent by the broker to the investor’s bank account is Rs. 48,529.12.

Role of WACC and My Holding in Determining CGT via MeroShare

To automate tax reporting and eliminate manual paperwork, CDSC integrated calculation tools directly into MeroShare. As an investor, you must complete two verification steps after selling on your broker’s platform before you can execute your share transfer:

Weighted Average Cost of Capital (WACC): If you purchase shares from the secondary market, apply for right shares, or receive bonus issues, you must log in to MeroShare and confirm your purchase price under the “My Purchase Source” tab. Following our detailed guide on how to calculate WACC in Mero Share ensures your base cost reflects your actual purchase price, preventing the system from overcharging capital gains tax.
My Holding Declaration: Located under the “My Purchase Source” menu, this screen lists the scrips you traded along with CDSC’s tracked acquisition dates. You must verify and confirm whether each lot was held for more or less than 365 days.

Once you verify WACC and confirm your holding status, your broker receives the exact taxable amount and can deduct the proper CGT before you complete the settlement via Mero Share EDIS.

Additional Transaction Costs: Broker Commission, SEBON Fee, and DP Charge

When calculating final returns from an equity investment, keep in mind that CGT is applied only after these fixed transaction charges are subtracted from your gross proceeds:

Fee Type	Rate / Amount	Charged By
SEBON Regulatory Fee	0.015% of total traded turnover	Securities Board of Nepal
DP Transaction Charge	Flat Rs. 25 per company (scrip) per trading day	Depository Participant (Bank/Broker)
Broker Commission (Up to Rs. 50,000)	0.40%	Licensed Broker Firm
Broker Commission (Rs. 50,001 to Rs. 5,00,000)	0.37%	Licensed Broker Firm
Broker Commission (Rs. 5,00,001 to Rs. 20,00,000)	0.34%	Licensed Broker Firm
Broker Commission (Rs. 20,00,001 to Rs. 1,00,00,000)	0.30%	Licensed Broker Firm
Broker Commission (Above Rs. 1,00,00,000)	0.27%	Licensed Broker Firm

When you set up an account through our walkthrough on how to open a broker account online in Nepal, your broker ties these fee schedules directly into your automated settlement sheets.

Is Capital Gains Tax on Shares Final or Adjustable in Nepal?

One of the most widely debated topics among Nepali stock market participants is whether the 5% or 7.5% CGT withheld by stockbrokers counts as a final withholding tax or an advance tax subject to end-of-year adjustment under standard personal income brackets.

According to current interpretations issued by the Inland Revenue Department (IRD) under Section 95A of Nepal’s Income Tax Act 2058:

For General Natural Retail Investors: If you trade shares on your personal Demat account as an investor rather than as an incorporated business, the CGT deducted at the source by your broker is treated as a final withholding tax. You are not required to aggregate these capital gains into your regular employment or business income during your annual tax assessment.
For Registered Institutional and Proprietary Traders: For corporate entities, institutional firms, and individuals registered as commercial proprietary share-trading enterprises, the CGT withheld at the broker counter acts as an advance tax (TDS). These firms must include their total share-trading revenue in their formal profit-and-loss accounts and pay standard corporate income tax (typically 25% or 30%), using the withheld CGT as a credit against their year-end tax obligation.

Conclusion

Capital Gains Tax directly impacts the net profitability of your NEPSE investments. By timing your trade exits around the 365-day threshold, you can lower your tax liability from 7.5% to 5.0%. Always verify your WACC and My Holding declarations accurately in MeroShare to avoid paying more tax than you owe, and keep your settlement sheets on file for clean financial records.

Frequently Asked Questions (FAQs)

What is the current Capital Gains Tax rate for individual investors in NEPSE?

Individual retail investors pay 7.5% on net capital gains if the shares were held for 365 days or less (short-term), and 5.0% if the shares were held for more than 365 days (long-term).

How does CDSC calculate the 365-day holding period for short-term vs long-term tax?

CDSC counts the calendar days from the purchase settlement date (the day the shares entered your Demat account) to the execution settlement date of your sell order. It applies a First-In, First-Out (FIFO) method to identify which specific allotment of shares you are selling.

Is CGT deducted automatically when selling shares through a broker in Nepal?

Yes. You do not need to visit a tax office to pay CGT manually. After you confirm your WACC and submit your EDIS in MeroShare, your brokerage firm automatically calculates and deducts the appropriate tax from your sales proceeds before remitting the balance to your bank account.

Do you have to pay Capital Gains Tax if you sell shares at a net loss?

No. CGT applies only to positive net gains. If your net sale proceeds (after deducting brokerage, SEBON, and DP fees) are equal to or less than your acquisition cost (WACC), your tax liability is Rs. 0.00.

Does a bonus share allotment reset the holding duration for CGT calculations?

Yes. Bonus shares are treated as an independent allotment with their own distinct credit date. While your original parent shares retain their historic purchase date, the new bonus shares start their own 365-day holding period clock from the day they are credited to your Demat account.