CAPITAL GAIN TAX

Capital Gains (Losses) means any profits or gains (Losses) arising from transfer of Capital
Assets/ Capital Liabilities.

Transfer means: Transfer of ownership, distributions, mergers, Leases, extinguishment, destroy,

lost, expired.

Capital gains are the amount of profit that an investor realizes when an investor sells the capital
assets for a price higher than the purchase price. Capital gain tax arises when asset is sold. An
investor can own shares that appreciate every year, but the investor does not incurr a capital
gains tax on the shares until they are sold. A capital gain is the difference between the purchase
price (the basis) and the sale price of an asset.

Capital Gains (Losses) means any profits or gains (Losses) arising from transfer of Capital
Assets/ Capital Liabilities.

Transfer means: Transfer of ownership, distributions, mergers, Leases, extinguishment,

destroy, lost, expired.

Gains from the transfer of Business Assets or Depreciable Assets are included in Business
Income.
Gains on transfer of Non-Business Chargeable Assets (NBCA) are taxed at the prescribe rates.
Other Capital Assets are not taxed e.g. Gains on Gold.

Assets Classification
Income Tax Act 2085 has classified the assets into four categories described as below:

a. Non Chargeable Business Assets (NCBA)

b. Business Assets
c. Depreciable assets
d. Trading stock

Assets = Non Chargeable Business Assets (NCBA) + Business Assets + Depreciable

assets + Trading stock

Non-business chargeable asset (NBCA): means any land, building and interest or security in
any entity except the following properties:
a) Business assets, depreciable assets or stocks-in-trade,
b) A private building owned by a natural person in the following situation,-
  Being under ownership for a continuous period of Ten years or more, and
 Where that person has resided for a total period of Ten years or more continuously or at
 several times.
c) An interest of a beneficiary in a retirement fund,
d) A private land and building belonging to and disposed of by any natural person for a value
less than three million rupees, or
e) An asset disposed of by way of transfer in any manner other than the purchase and sale within
three generations. (Refer section 2 (da))
Business asset: means assets used in business either for its own use or for the purpose of
investment. However it does not include depreciable asset. It means a piece of land, an interest in
any entity, and a security held by a person. (Refer section 2(kata))

Depreciable asset: means assets used in generating income by a person from a business or investment
and that are likely to lose their value because of wear and tear, obsolescence, or the passing away of time.
It includes tangible as well as intangible asset. (Refer section 2(kara))

Stock in trade: means the property owned by any person and sold or to be sold in the course of regular
business carried on by such person, the property in work-in-progress and inventory of materials to be
incorporated in the property. Provided that, this term does not include a property held in foreign currency.
(Refer section 2 (yan ))
 Some to the information is given through following Questions and Answers.

Q. When the Tax on Land and Building collected?

Ans: Land Registration Office (Malpot) at the time of registration should collect the income tax.

Q. what is the tax rate for transfer of land and building (a) owned more than 10 years (b) owned
6 years (c) owned less than 5 years?
Ans:
a. If owned more than 10 years, it is not considered NBCA, hence not taxable.
b. If owned 5-10 years, tax rate is 2.5%.
c. If owned for less than 5 years, tax rate is 5%

For entity who is not in real estate business: tax rate is 10%

The tax so collected by the Malpot is considered as advance and it can be claimed as tax credit
while submitting the income tax return.

Q. What is the area of a personal buildings?

Ans: The area of personal building and equal land area around the building or 1 ropani,
whichever is less.

Q. What is the exemption limit for land and Building?

Ans: Upto NPR 30 lakh. Transfer of land and building below NPR 30 lakh is not taxable.

Q. what is any person has two houses?

Ans: one house is considered as personal(residential) building at the discretion of that person.

Shares and Debentures

Q. How the taxation is done on Securities?
Ans:
If listed in Nepal Stock Exchange:

1. For Natural Person: 5% (Final)

2. For Other (entity): 10% (Not Final)

If Not listed in Nepal Stock Exchange:

1. For Natural Person: 10% (Final)

2. For Others (entity): 15%(Not Fianl)
Q. How TDS is calculated on transfer of Securities?
Ans: if selling price of the share is more that the purchase price:
Income = Selling Price – Purchasing Price

In case, Purchase price is more than selling price there will be Capital Loss. Capital Loss can be
set-off against capital gains.