Have you ever sold off a plot of land, a house, or shares and in return, earned a huge profit? If yes, you might have to pay out some money from your earnings as Capital Gain Tax — And have you wondered what that amount is?
With the help of this guide, you will be provided with a step-by-step overview of what Capital Gain Tax is, the consequential benefits, and how it’s determined. Even if you haven’t got any idea on Capital Gain Tax, By the end of this blog you will have a crystal-clear understanding about it and its importance.
What is Capital Gain Tax?
Capital Gain Tax is the tax you pay on the profit you make when you sell something valuable, like land, a house, or shares.
It is charged only on the “gain” that means the difference between what you bought it for and what you sold it for, not the full selling price.
In Nepal, Capital Gain Tax is regulated by the Inland Revenue Department (IRD) under the Income Tax Act. There are different rules that apply depending on what we are selling and how long we have owned it.
Types of Capital Gains
Capital gains are classified into two main types based on the duration for which the property or assets are held. They are:
Short-Term Capital Gain – If an asset is sold within a short holding period (usually less than 5 years for real estate), the profit is considered short-term and taxed at a higher rate.
Long-Term Capital Gain – If an asset is held for a longer period (typically 5+ years for property), the gain is considered long-term and taxed at a concessional rate.
Why is Paying Capital Gain Tax Important?
In order to ensure transparency in finances and assure everyone contributes equally to government revenue, capital gains tax is essential. Here are some benefits of paying capital gains tax:
Stay legally safe
Paying the right tax keeps you free from legal troubles and penalties.
Build your financial trust
Banks, government offices, and other institutions trust people with clean tax records. It helps you while taking loans or selling more assets in the future.
Support national development
The tax you pay helps the government build roads, schools, hospitals, and other public services.
Avoid future complications
If you pay Capital Gain Tax properly now, you won’t face fines, interest, or audits later.
Easy transfer of property
Paying taxes correctly ensures that property ownership transfers are smooth and quick without hassle and extra paperwork.
How is Capital Gain Tax Calculated in Nepal?
The calculation depends on the nature of the asset. Here’s how it works for different types:
1. Capital Gain Tax on Real Estate
Holding Period < 5 Years: 10% tax on the gain.
Holding Period ≥ 5 Years: 5% tax on the gain.
Calculation Formula:
Capital Gain = Selling Price – (Purchase Price + Allowable Expenses)
Allowable Expenses Include:
- Renovation costs (with proper documentation)
- Commission paid to brokers
- Legal fees
Use our Real Estate Capital Gain Tax Calculator to know the tax we need to pay while selling ghar or jagga.
2. Capital Gain Tax on Shares
For Individuals:
1. Listed Company Shares (e.g., traded on NEPSE):
Short-term (held ≤ 365 days): 7.5%
Long-term (held > 365 days): 5%
2. Unlisted Company Shares:
Both short-term and long-term: 10%
3. Capital Gain Tax on Other Assets (Bonds, Mutual Funds, etc.)
Generally taxed at 5% to 10%, depending on the asset type and holding duration.
(same as stock for listed MF.. bonds to be rechecked)
How to Pay Capital Gain Tax in Nepal?
Compute the Gain: Determine the profit after deducting purchase price and allowable expenses.
File Tax Return: Submit details to the Inland Revenue Department (IRD) along with supporting documents.
Pay the Tax: Deposit the calculated tax amount through designated banks or online portals.
Failure to pay CGT on time may result in penalties and interest charges.
Paying Capital Gain Tax is not just a legal duty — it also keeps your records clean, builds your financial credibility, and helps you avoid penalties later. Plus, it supports the country’s growth!
(For sell of listed stock, tax is deducted by broker through TDS)
Conclusion
Capital gain tax in Nepal is an important consideration for anyone dealing with property, shares, or other investments. By understanding the tax rates, exemptions, and filing procedures, you can ensure compliance and minimize liabilities.
Always consult a tax advisor for personalized guidance, especially for complex transactions. Staying informed helps you make smarter financial decisions while adhering to Nepal’s tax regulations.
People Also Ask (FAQs)
1. Is there capital gain tax on inherited property in Nepal?
Yes, but the taxable gain is calculated based on the market value at the time of inheritance, not the original purchase price.
2. How can I reduce capital gain tax in Nepal?
Hold the asset for more than 5 years to qualify for a lower tax rate. Reinvest gains in another property under specified conditions. Claim allowable expenses like renovation and brokerage fees.
3. Do I have to pay capital gain tax if I sell at a loss?
No. Capital gain tax applies only to profits. If you sell at a loss, no tax is levied.
4. Is capital gain tax applicable on gifts?
Gifts are usually exempt unless they involve business transactions. However, the recipient may face tax implications if they later sell the gifted asset.
5. What happens if I don’t pay capital gain tax?
Non-payment can lead to fines, interest charges, and legal action by the IRD. Proper documentation and timely filing are essential.
