Share market contributes Rs 9.82bn CGT in six months

The government has collected Rs 9.82bn as capital gains tax from share transactions in the first half of 2024/25.

According to the CDS and Clearing Ltd—the agency providing centralized depository, clearing, and settlement services for share transactions—the total CGT collection from share trading between mid-July 2024 to mid-Jan 2025 has reached Rs 9.82bn.

Nearly half of the CGT collection during the period came from the first month of the current fiscal year (mid-July to mid-Aug), when Rs 4.23bn was collected from securities trading. The sixth month, Poush (mid-Dec to mid-Jan), recorded the lowest CGT collection so far this year. According to the CDS and Clearing Ltd, Rs 580.7m was collected from share transactions in Poush.

CGT collection in Bhadra (mid-Aug to mid-Sept), Ashwin (mid-Sept to mid-Oct), Kartik (mid-Oct to mid-Nov), and Mangsir (mid-Nov to mid-Dec) was Rs 2.57bn, Rs 586.55m, Rs 758.78m, and Rs 1.4bn, respectively.

Share trading during the first month of the current fiscal year (mid-July to mid-Aug) was higher than the entire collection of fiscal year 2023/24, when the government raised Rs 4.15bn as CGT from share trading.

CGT collection is tied to the market capitalization—the market price of listed shares in the secondary market. When market capitalization is high investors get a high selling price for their securities which translates to higher CGt for the state. Market capitalization had surged to Rs 4.765trn in mid-August, Rs 1.099trn higher than a month before.

Individual investors are required to pay CGT at rates of either five percent  or 7.5 percent, depending on the duration of shares held. Investors who sell shares within a year of purchase are considered short-term investors and are levied a 7.5 percent CGT. Likewise, those who sell after one year are categorized as long-term investors and are subjected to a five percent CGT. Institutional investors, on the other hand, are required to pay a 10 percent tax on their share transaction profits.

The highest CGT collection from share trading was in 2020/21, when the government mobilized Rs 15.54bn.

CGT collection is closely tied to market capitalization, which reflects the average value of shares of companies listed on the secondary market.