Short-term Traders to Be Taxed Higher; Investors in NEPSE Should Now Go Through This Additional Procedure For Settlement

CDS and Clearing Limited (CDSC) has added the feature to calculate the holding period of security in the Meroshare platform.

Short-term traders with a holding period of less than a year (365 days) will now be taxed 7.5% on capital gains. The Finance Minister's budget speech for the fiscal year 2078/79 increased the tax rate on capital gains by 50% for individual investors with a holding period of fewer than 365 days.

The capital gains tax is a type of tax applied to the profits earned on the sale of an asset. In the context of the capital market, this translates to the tax on gains made by the sale of shares of a company, units of a mutual fund, or other securities. The tax rates update is effective from Shrawan 01, 2078.

All days are counted from the day an investor purchases a security, even non-trading days, in order to calculate the holding period. Meanwhile, the capital gain tax for investors with a holding period longer than 365 days has been kept the same, i.e. at 5%.

This is the first time the government has decided to levy a capital gain tax based on the holding period. With this, the government has now made a distinction between short-term traders and long-term investors.

CDSC has made the feature to calculate the holding period available on Meroshare starting from Shrawan 03, 7 pm. Now, investors who trade in the secondary market will have to go through an extra procedure to complete the settlement of shares. The detailed guide to complete the additional procedure can be accessed here. The basic rationale is to make a distinction between shares traded within a year and shares traded with a holding period longer than a year.