This article leads you to all the required information relating to capital gain tax in Nepal.
What is Capital Gain Tax in Nepal?
Capital Gains Tax in Nepal is a tax you pay when you sell something, like property or stocks, for more money than you bought it for. This extra money you make is called a “capital gain.”
So, if you bought a piece of land for Rs 10,000 and later sold it for Rs 15,000, that extra Rs 5,000 is your capital gain. The tax you’d pay on this gain is what we call Capital Gains Tax. This tax is applicable to immovable property such as houses, Land, Stocks, etc.
According to Nepal’s Income Tax Act from 2002 ( 2058), you have to pay this tax when your profit from selling house-land crosses a certain amount. If your land or house is valued over 10 lakh, you have to pay some tax upfront. Before this law, there wasn’t a specific tax for profits made from just selling personal property.
Capital Gain Tax in Nepal
Each country has its own rules about CGT, and Nepal does too. To understand it better, let’s look at what Nepal’s tax rules mentioned about this:
The 10-Year Rule
In Nepal, if you own a house or land for 10 years and sell it for up to 10 lakh, you don’t have to pay extra taxes on the profit. But if you sell other things like stocks after a year and make money, you will have to pay taxes on those earnings.
According to the Land Act 2021, if a landowner and tenant agree that one gives up their land rights to the other, there are specific rules. They set the land’s price based on current market rates.
They also consider costs for land bought before a certain date. After all is settled, the land office puts the land in the new owner’s name.
Gift and Inheritance Rules
If a property is given as a gift or passed down through three generations, the person getting it doesn’t have to pay the capital gains tax. But, if they sell that property right away, they’ll need to pay taxes on the profit they make from the sale.
Passing Down Property After Death
After a property owner passes away, the property given to someone else is priced at its current market value. If that property is later sold, they use this price to figure out the taxes.
Property Transfer Amongst Spouse
In the Income Tax Act of 2058, Article 43 talks about how spouses can give property to each other. If you get property this way, you can claim costs linked to buying it.
The person giving away the property doesn’t have to pay taxes if the money spent and earned from the property are equal.
Responsibilities for Capital Gain
According to a rule in the Income Tax Act 2058, specifically Section 5 of Article 95(a), the Land Revenue Office collects taxes whenever people make money from selling properties.
These properties fall under a special category called taxable non-professional assets. So, every time someone buys or sells property, they need to let this office know by registering the transaction with them.
Capital Gain Tax Rate in Nepal
Knowing how much tax you might have to pay when you sell your property is important. Understanding the tax helps you prepare and know how much money you’ll need to set aside.
The Time Factor
The amount of tax you owe depends on how long you’ve had the property. The longer you own it, the less you pay.
Owning for Over 5 Years
Let’s say you’ve had your land or house for more than 5 years. In that case, you’ll be giving 5% of your profit as tax. So, if you made a $100 profit, you’d owe $5 in tax.
Owning for 5 Years or Less
If you’ve owned the property for 5 years or less, from the fiscal year 2079 onwards, the government will charge you a higher tax. Specifically, the government will take 7% of whatever profit you make.
In conclusion, Capital Gains Tax is a charge levied when you profit from selling assets such as houses or stocks. It has specific guidelines for capital gain tax in Nepal, with rates varying based on the duration of ownership.
It’s important to understand these regulations, particularly if you intend to sell your property. The Land Revenue Office assists individuals in navigating these tax responsibilities.