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Capital gain tax in Nepal is the tax you pay on the profit earned from selling assets such as land, houses, shares, or business interests. It is not a separate tax — it falls under the Income Tax Act 2058 (2002) as part of investment income. Whether you are selling ancestral property, a Kathmandu apartment, or listed shares on NEPSE, you must understand how capital gains are calculated and taxed. This guide covers everything — tax rates for individuals and entities, calculation methods, exemptions, property vs share transactions, filing requirements, and practical examples for Fiscal Year 2082/83 (2025/26).
Capital gain tax in Nepal is levied on the profit from selling assets. Rates: 5% on land/buildings (held over 5 years), 10% (held under 5 years) for individuals. Listed share gains: 5% (held over 365 days), 7.5% (held under 365 days). Entity rate: 10% on all capital gains. Calculated as: Sale Price − Cost of Acquisition − Improvement Costs = Taxable Gain. Pay at the land revenue office (property) or through broker/DP (shares). File in annual income tax return. Governed by Income Tax Act 2058, Sections 36-42.
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What Is Capital Gain Tax in Nepal?
Capital gain tax is the tax on the profit (gain) you earn when you sell or transfer a capital asset for more than what you paid for it. Under Nepal's Income Tax Act 2058, capital gains are treated as investment income and taxed accordingly under Sections 36 to 42.
Capital assets include:
- Land and buildings (house, apartment, commercial property)
- Shares and securities (listed and unlisted)
- Business interests (partnership shares, sole proprietorship assets)
- Other depreciable and non-depreciable assets
| Detail | Information |
|---|---|
| Governing law | Income Tax Act 2058 (2002), Sections 36-42 |
| Tax type | Part of income tax (investment income head) |
| Taxable event | Sale, transfer, exchange, or disposal of a capital asset |
| Who pays | The seller (transferor) of the asset |
| Filing | Included in annual income tax return |
| Payment | At land revenue office (property) or deducted by broker (shares) |
Capital Gain Tax Rates in Nepal (FY 2082/83)
Capital gain tax rates in Nepal vary based on the type of asset, holding period, and whether the seller is an individual or entity.
Tax on Land and Buildings
| Seller Type | Holding Period | Tax Rate | Notes |
|---|---|---|---|
| Individual (resident) | More than 5 years | 5% of gain | Long-term rate |
| Individual (resident) | 5 years or less | 10% of gain | Short-term rate |
| Entity (company/firm) | Any period | 10% of gain | No long-term benefit for entities |
| Non-resident individual | Any period | 10% of gain | No long-term benefit for non-residents |
Tax on Shares and Securities
| Share Type | Holding Period | Tax Rate | Notes |
|---|---|---|---|
| Listed shares (NEPSE) | More than 365 days | 5% of gain | Long-term rate |
| Listed shares (NEPSE) | 365 days or less | 7.5% of gain | Short-term rate |
| Unlisted shares | Any period | 10% of gain | Flat rate regardless of holding |
| Entity selling shares | Any period | 10% of gain | Same as corporate tax on gains |
Tax on Other Capital Assets
| Asset | Tax Rate | Notes |
|---|---|---|
| Business interests (partnership) | 10% of gain | Gain on disposal of partnership share |
| Depreciable assets (vehicles, machinery) | Normal income tax rates | Gain added to business income (balancing charge) |
| Intellectual property | Normal income tax rates | Taxed under business/investment income |
How to Calculate Capital Gain Tax
The basic formula for calculating capital gain is straightforward, but the details matter — especially for property transactions where improvement costs and inflation indexation apply.
Basic Formula
Capital Gain = Sale Price − Cost of Acquisition − Cost of Improvement
Then apply the applicable tax rate to the gain amount.
Calculation for Land and Buildings
| Component | Description | Example (NPR) |
|---|---|---|
| Sale price | The actual transaction amount (or government minimum valuation, whichever is higher) | 50,00,000 |
| Cost of acquisition | Price you originally paid (as per purchase deed) | 20,00,000 |
| Cost of improvement | Construction, renovation costs with receipts | 5,00,000 |
| Capital gain | Sale price − acquisition − improvement | 25,00,000 |
| Tax (5 years+) | 5% of gain | 1,25,000 |
| Tax (under 5 years) | 10% of gain | 2,50,000 |
Calculation for Shares
| Component | Description | Example (NPR) |
|---|---|---|
| Sale proceeds | Shares sold × sale price per share | 5,00,000 |
| Purchase cost | Shares × purchase price per share | 3,00,000 |
| Broker commission (buy + sell) | SEBON-regulated commission | 10,000 |
| Capital gain | Sale − purchase − commission | 1,90,000 |
| Tax (held 365+ days) | 5% of gain | 9,500 |
| Tax (held under 365 days) | 7.5% of gain | 14,250 |
Important: For NEPSE-traded shares, the capital gain tax is deducted at source by the broker or depository participant (DP) at the time of settlement. You do not pay it separately.
Government Minimum Valuation (न्यूनतम मूल्यांकन)
For property transactions, Nepal uses a government minimum valuation system. If the declared sale price is lower than the government minimum, the minimum valuation is used as the sale price for tax purposes.
- The Land Revenue Office sets minimum valuations for each area/ward annually
- The valuation is typically lower than market prices but serves as the tax floor
- You cannot declare a sale price below the minimum valuation
- Capital gain tax is calculated on the higher of: actual sale price or minimum valuation
Practical implication: Many property transactions in Nepal are registered at the minimum valuation to reduce tax liability. However, declaring an undervalued price can lead to legal disputes and complications if the buyer later sells the property.
Capital Gain Tax on Property (Land and House)
Property transactions attract the most capital gain tax in Nepal. Here is the complete process:
When Is Capital Gain Tax Triggered on Property?
- Sale/transfer of land (ropani, kattha, bigha, etc.)
- Sale of house or apartment
- Gift of property (treated as transfer at market value for close relatives, except exemptions)
- Exchange of property
- Compulsory acquisition by government (compensation is taxable)
Step-by-Step Process
| Step | Action | Where |
|---|---|---|
| 1 | Agree on sale price and execute sale deed | Between buyer and seller |
| 2 | Visit Land Revenue Office for property transfer | District Land Revenue Office (Malpot) |
| 3 | Submit documents: lalpurja, citizenship, sale deed | Land Revenue Office |
| 4 | Capital gain tax calculated by office | Based on declared price vs minimum valuation |
| 5 | Pay capital gain tax at the bank counter | Designated bank at the Land Revenue Office |
| 6 | Property transferred to buyer's name | Lalpurja updated by Land Revenue Office |
| 7 | Report in annual income tax return | File at ird.gov.np |
Registration Fee (Separate from Capital Gain Tax)
Note that the registration fee (रजिस्ट्रेसन शुल्क) is different from capital gain tax. The buyer pays the registration fee, while the seller pays capital gain tax.
| Transaction Type | Registration Fee | Paid By |
|---|---|---|
| Within municipality area | 4% of valuation | Buyer |
| Outside municipality area | 4% of valuation | Buyer |
| Transfer to close family (gift) | Reduced rates apply | Recipient |
| Guthi (trust) property | Special rates | As applicable |
Selling property in Nepal? Get professional tax advice →
Capital Gain Tax on Shares (NEPSE)
Nepal's stock market (NEPSE) has seen significant growth, and capital gain tax on share trading is an important consideration for investors.
How Share Capital Gain Tax Works
- Tax is deducted at source (TDS) by the broker or DP during share settlement
- The WACC (Weighted Average Cost of Capital) method is used for calculating cost basis when shares are bought at different times
- Bonus shares: cost basis is zero (entire sale price is gain)
- Right shares: cost basis is the right share price paid
- IPO shares: cost basis is the IPO issue price
Capital Gain Tax on Different Share Types
| Share Type | Rate (Short-term) | Rate (Long-term) | TDS Method |
|---|---|---|---|
| Ordinary listed shares | 7.5% (≤365 days) | 5% (>365 days) | Deducted by broker |
| Bonus shares | 7.5% / 5% | Based on allotment date | Deducted by broker |
| Right shares | 7.5% / 5% | Cost = right price paid | Deducted by broker |
| IPO allotment shares | 7.5% / 5% | Cost = IPO price | Deducted by broker |
| Promoter shares (unlisted) | 10% | 10% | Self-reporting |
| OTC market shares | 10% | 10% | Self-reporting |
Practical Example: Listed Shares
You bought 100 shares of Company A at NPR 500 each (total cost NPR 50,000). After 18 months, you sell at NPR 800 each (total sale NPR 80,000).
- Capital gain: NPR 80,000 − NPR 50,000 = NPR 30,000
- Holding period: 18 months (more than 365 days) → long-term rate
- Tax: 5% × NPR 30,000 = NPR 1,500
- This is deducted automatically by your broker during settlement
Exemptions from Capital Gain Tax
Certain transactions are exempt from capital gain tax or receive preferential treatment under the Income Tax Act 2058.
| Exemption | Condition | Legal Basis |
|---|---|---|
| Transfer by inheritance | Property received through inheritance (no sale) | Not a disposal event under Section 36 |
| Transfer between spouses | Property transfer between husband and wife | Section 42 — no gain recognized |
| Partition of coparcenary property | Division of family/joint property among coparceners | Section 42 — treated as continuation |
| Agricultural land (small holdings) | Transfer of agricultural land below certain thresholds in rural areas | Special provisions under Schedule 1 |
| Government acquisition (compensation) | Partial exemption may apply for forced acquisition | Case-specific |
| Merger/demerger | Business restructuring where conditions are met | Section 42 — rollover relief |
Important for married couples: Property transfer between spouses is not treated as a taxable disposal. This is significant for couples managing marital property rights. However, when the receiving spouse later sells the property, the original acquisition cost is used for calculating gain.
Capital Gain Tax After Divorce
Property division during divorce has specific capital gain implications:
- Court-ordered property division under Section 99 of the Civil Code 2074 may qualify as partition (not sale), potentially avoiding capital gain tax
- Selling joint property to divide proceeds — both parties share the capital gain tax proportionally
- Transfer to spouse as part of divorce settlement — treatment depends on whether it is partition or sale
- Consult a tax professional for complex divorce property situations
Capital Gain Tax for NRNs and Foreign Nationals
Non-resident Nepalis (NRNs) and foreign nationals face different rules when disposing of Nepali assets:
| Category | Property Rights | Capital Gain Tax Rate | Notes |
|---|---|---|---|
| NRN with NRN card | Can own apartment/flat (not land) | 10% on gain (no long-term benefit) | Non-resident rate applies |
| Foreign national (married to Nepali) | Cannot own land; may own apartment jointly | 10% on gain | Must also get tax clearance before departure |
| Foreign company | Through registered Nepal entity only | 10% on gain | Withholding applies |
Capital Gain Tax vs Income Tax: Key Differences
| Feature | Capital Gain Tax | Regular Income Tax |
|---|---|---|
| Tax base | Profit from asset disposal | Salary, business income, investment income |
| Rates (individuals) | 5% or 10% (concessional) | 1% to 39% (progressive slabs) |
| Collection method | At point of transfer + annual return | TDS + annual return |
| Holding period benefit | Yes (lower rate for long-term) | No |
| Exemptions | Spousal transfer, inheritance, partition | Basic threshold (NPR 5-6 lakh) |
| Filing | Part of annual income tax return | Same return |
Common Mistakes and How to Avoid Them
| Mistake | Consequence | How to Avoid |
|---|---|---|
| Declaring sale price below minimum valuation | Tax calculated on minimum valuation anyway; potential fraud investigation | Always check government minimum valuation before agreeing on price |
| Not keeping original purchase documents | Cannot prove cost of acquisition; entire sale price treated as gain | Keep lalpurja copy, purchase deed, improvement receipts for at least 5 years |
| Ignoring improvement costs | Paying more tax than necessary | Keep construction/renovation bills to deduct from gain |
| Forgetting bonus share tax | Unexpected tax deduction when selling | Bonus shares have zero cost basis — plan for full gain taxation |
| Not reporting in annual return | Penalties under Section 117 + interest at 15% | Include all capital gains in your annual return |
| Miscalculating holding period | Wrong tax rate applied | Count from purchase date to sale date carefully |
| Not getting PAN before selling property | Transfer may be delayed at Land Revenue Office | Get PAN card before initiating property sale |
Recent Changes and Updates
Nepal's capital gain tax provisions have been updated through annual Finance Acts. Key recent changes include:
- Listed share rates differentiated: 5% for long-term (>365 days) and 7.5% for short-term (≤365 days) — introduced to encourage long-term investment
- Holding period for property: The 5-year threshold for concessional rate has remained consistent
- Minimum valuation updates: Government minimum valuations are revised periodically, increasing the tax base
- Digital share settlement: CDSC and broker systems now automatically deduct capital gain tax on share trades
How to Minimize Capital Gain Tax Legally
There are legal ways to reduce your capital gain tax burden in Nepal:
- Hold assets for longer periods: Property held over 5 years gets 5% instead of 10%; shares over 365 days get 5% instead of 7.5%
- Document all improvement costs: Construction, renovation, and development expenses reduce the taxable gain
- Use spousal transfer: Transfer between husband and wife is not a taxable event (but plan the subsequent sale carefully)
- Time your share sales: If close to the 365-day mark, waiting a few days can save 2.5% in tax
- Keep all receipts: Without proof of purchase price, the entire sale amount becomes taxable gain
- Use the correct valuation: Ensure the Land Revenue Office uses your actual (higher) purchase price, not a lower historical minimum valuation
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Key Sections of the Income Tax Act 2058 for Capital Gains
| Section | Subject | Key Provision |
|---|---|---|
| Section 36 | Gains from disposal of business assets | Calculation of gain on depreciable and non-depreciable assets |
| Section 37 | Cost of assets | How to determine cost of acquisition |
| Section 38 | Incomings for assets | What constitutes disposal proceeds |
| Section 39 | Disposal of trading stock | Gain on inventory disposal |
| Section 40 | Gain from investment insurance | Proceeds from insurance claims on assets |
| Section 41 | Net gain from disposal of interest in entity | Gain from selling partnership/company interest |
| Section 42 | Transfers not treated as disposals | Spousal transfer, partition, merger relief |
| Section 95 | Return of income | Filing obligation for capital gains |
| Schedule 1 | Tax rates | Capital gain tax rates for different asset types |
Frequently Asked Questions
For resident individuals, the capital gain tax rate on land and buildings is 5% if the property was held for more than 5 years, and 10% if held for 5 years or less. Entities and non-residents pay a flat 10% regardless of holding period.
Capital gain = Sale price (or government minimum valuation, whichever is higher) minus cost of acquisition minus cost of improvements. Apply the applicable rate (5% or 10%) to the gain. Example: If you bought land for NPR 20 lakh and sell for NPR 50 lakh after 6 years, gain is NPR 30 lakh and tax is 5% = NPR 1.5 lakh.
For listed shares (NEPSE): 5% if held for more than 365 days, 7.5% if held for 365 days or less. For unlisted shares: flat 10%. The tax is automatically deducted by the broker during share settlement.
For property: capital gain tax is paid at the Land Revenue Office at the time of property transfer. For listed shares: tax is deducted at source by the broker. All capital gains must also be reported in your annual income tax return filed by Ashoj end (mid-October).
No. Receiving property through inheritance is not a taxable disposal under the Income Tax Act 2058. However, when you later sell the inherited property, capital gain tax applies. The cost basis will be the original acquisition cost of the deceased or the value at the time of inheritance.
No. Under Section 42 of the Income Tax Act 2058, transfer of property between spouses is not treated as a disposal and no capital gain tax is levied. However, when the receiving spouse sells the property, the original purchase cost is used for gain calculation.
Bonus shares have a cost basis of zero since they are received free. When you sell bonus shares, the entire sale proceeds are treated as capital gain. Tax is 5% (held >365 days) or 7.5% (held ≤365 days) for listed shares.
Yes. You need a PAN (Permanent Account Number) for all tax-related transactions including property transfers at the Land Revenue Office and share trading through NEPSE. Apply for PAN at ird.gov.np before initiating any asset sale.
The government minimum valuation is the floor price set by the Land Revenue Office for each area. If your declared sale price is lower than this minimum, the tax is calculated on the minimum valuation. These rates are updated periodically and vary by location, ward, and road access.
Yes. Under the Income Tax Act 2058, capital losses from the disposal of investment assets can be set off against capital gains in the same fiscal year. If losses exceed gains, the net loss can be carried forward for up to 7 years to set off against future investment income.
Registration fee is paid by the buyer for registering the property transfer (typically 4% of valuation). Capital gain tax is paid by the seller on the profit from the sale (5% or 10% of gain). Both are paid at the Land Revenue Office during the same transaction.
Yes. NRNs are treated as non-residents for tax purposes and pay a flat 10% capital gain tax on property sales in Nepal — with no long-term holding benefit. NRNs can own apartments and flats (not land directly) under the NRN Act.
Generally yes, capital gain tax applies to agricultural land sales. However, small agricultural holdings in rural areas may receive partial exemption or special treatment under Schedule 1 provisions. The specific threshold varies — consult your local Inland Revenue Office for applicable exemptions.
Required documents include: lalpurja (ownership certificate), original purchase deed, citizenship certificates of buyer and seller, PAN card, property valuation from the Land Revenue Office, improvement cost receipts (if any), and the sale deed. If a company is selling, also bring the company registration certificate and board resolution.
Failure to pay capital gain tax results in 15% annual interest on the unpaid amount under Section 119. Additionally, not reporting capital gains in your annual return attracts late filing penalties of NPR 100/day (individuals) or NPR 500/day (entities). Deliberate understatement attracts a 50% penalty on the understated amount.
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