IRD Dir. Gen. Mainali Clarifies Ambiguity Surrounding New Capital Gain Tax Arrangements ; Claims Unawareness Led to Panic Selling in NEPSE

In a recent press conference held at the Finance Ministry's Subarna Hall, Director General of the Inland Revenue Department (IRD), Dirgha Raj Mainali, addressed concerns regarding the capital gains tax and announced significant changes aimed at providing clarity and support to investors in the capital market.

The government's new measures aim to create a fair and progressive tax system that benefits investors while promoting economic growth.

Director General Mainali acknowledged the concerns raised by investors regarding the ambiguity surrounding the new capital gains tax arrangement. He assured investors that the government had worked diligently to ensure that their interests were safeguarded, emphasizing that unnecessary ambiguity was not in the best interest of the investors.

One of the key issues raised by investors was the treatment of losses incurred during stock market transactions. Director General Mainali addressed this concern by announcing a new provision that allows investors to carry forward losses for up to seven years. This means that losses can be deducted from future income, providing investors with tax exemptions and avoiding the regressive taxation of losses.

Furthermore, the government plans to facilitate the return of Tax Deducted at Source (TDS) for investors who have experienced losses and are not required to pay taxes. The TDS amount will either be refunded by the government or adjusted against future tax liabilities, ensuring that investors are not burdened with unnecessary tax obligations.

Director General Mainali emphasized that the government aims to establish an effective tax rate and system that reflects the reality of doing business, highlighting the importance of tax exemptions for losses incurred by investors. This measure intends to alleviate the burden on investors who have experienced losses in the capital market.

In terms of transaction declarations, the government will no longer interfere with investors' reporting of their previous financial year's transactions. Standardized formats will be provided, and discussions will be held with investors and relevant government officials to promote a smooth and secure business environment. The goal is to resolve the issue of investors being subjected to taxes even when they experience losses.

Director General Mainali stressed that the government's focus is to provide equal benefits to investors in the capital market as those in other business sectors. The new tax measures have been designed with this principle in mind, aiming to create a fair and supportive environment for all investors.

To address concerns about expenses, the government will allow investors to deduct various expenses from their profits. This includes deductions for employee salaries, interest payments on loans taken for investment purposes, and expenses related to investments in vehicles used for stock market activities. A comprehensive list of deductible expenses will be provided to ensure transparency and facilitate accurate tax calculations.

Under the new tax measures, taxes paid will be considered as an advance and will be refunded by the state or carried forward to the following year if an investor incurs losses over a 12-month period. This provision ensures that investors are not burdened with unnecessary tax liabilities when they experience losses.

Director General Mainali concluded the press conference by emphasizing that the government's intention is to address the challenges faced by investors in the capital market. The new tax measures are aimed at supporting the interests of millions of investors and do not seek to exploit or deceive them.

The government acknowledges the substantial losses suffered by investors and has prioritized their interests by introducing these progressive tax measures.

(The article is based on Director General Mainali's conversation with some reporters at Suvarna Hall of the Ministry of Finance on Tuesday)

Misinterpretation of the new arrangements in discussion caused a panic in the investors. Consequently, the NEPSE index closed at 1,888.61 today after losing huge 53.16 points from the last trading day's closing. This is a loss of 2.74%.

Read here: NEPSE Trips Down Painful 53.16 Points; All Sectors Witness Harsh Plunge

Similarly, Finance Minister Dr. Prakash Sharan Mahat in a press conference held today, stated that the government had good intentions with regard to the stock market. The press conference had been called today to address questions regarding the earlier announced fiscal budget of 2080-81. "We are positive with regard to the share market. We do not have any intentions to spoil the market," Minister Mahat shared.