Capital Gains Tax on Shares in Nepal: WACC Calculation, Holding Periods & MeroShare Guide

When you profit from selling shares on the Nepal Stock Exchange (NEPSE), the government of Nepal levies a Capital Gains Tax (CGT - पुँजीगत लाभकर) on your net trading gains. Unlike many other nations where tax filing occurs months later, Nepal operates an automated, real-time withholding system integrated into MeroShare and your broker's settlement portal.

To ensure you never overpay tax or incur penalties, you must understand how your Holding Period determines your tax rate, how the Weighted Average Cost of Capital (WACC) is calculated, and how to verify purchase sources in MeroShare.

1. Current Capital Gains Tax Rates in Nepal

Under Section 95Ka of the Income Tax Act 2058, the Government of Nepal differentiates individual retail investors based strictly on the holding period of the shares sold:

2. What Is WACC and Why Does It Matter?

WACC stands for Weighted Average Cost of Capital (भारित औसत लागत). When you acquire shares of the same company at different times and different prices (e.g., 10 shares in an IPO at NPR 100, 50 shares in the secondary market at NPR 450, and 20 bonus shares), you cannot arbitrarily choose which specific batch you are selling.

CDSC mandates the WACC formula to calculate the uniform average purchase price of your entire holding:

WACC = Total Cost of All Purchases (including purchase commissions & DP fees) / Total Number of Shares Acquired

How Bonus and Rights Shares Affect WACC

• IPO / FPO Purchases: Entered at actual allotment cost (typically NPR 100 par value, or approved premium price).
• Secondary Market Purchases: Automatically logged by CDSC with broker commissions and SEBON fees included.
• Rights Shares: Cost is registered at statutory face value (NPR 100 per share).
• Bonus Shares: Cost is registered at statutory face value of NPR 100 under current CDSC rules.

3. Step-by-Step: Confirming WACC in MeroShare

Whenever you execute a sell order on NEPSE, you must confirm your purchase cost before EDIS transfer:

1. Log into your MeroShare account (meroshare.cdsc.com.np).
2. Click on the My Purchase Source tab from the sidebar.
3. Select the company script you just sold and click Search.
4. Review your purchase history. The system displays your acquisition batches, quantities, and dates. Tick the boxes next to the relevant holdings.
5. Click Proceed and verify the auto-calculated WACC price per share.
6. Confirm by clicking Update.
7. Navigate to My Holdings, select the script, and check the holding period duration (short-term vs long-term). Confirm your holding duration.
8. Finally, proceed to My EDIS → Transfer Shares to complete settlement.

4. Step-by-Step Capital Gains Tax Calculation

Let's walk through a realistic selling scenario:

• Quantity Sold: 200 shares of Company ABC
• Selling Price: NPR 550 per share
• Gross Sales Turnover: 200 × NPR 550 = NPR 110,000
• Selling Expenses:
  • Brokerage Commission (0.37% on NPR 110,000): NPR 407.00
  • SEBON Regulatory Fee (0.015%): NPR 16.50
  • DP Transfer Charge: NPR 25.00
  • Total Selling Costs: NPR 448.50
• Net Sales Consideration: NPR 110,000 - NPR 448.50 = NPR 109,551.50
• Total Purchase Cost (WACC NPR 350 × 200): NPR 70,000.00
• Net Capital Gain: NPR 109,551.50 - NPR 70,000.00 = NPR 39,551.50

Tax Liability:

• If held ≥ 365 days (5% rate): NPR 39,551.50 × 5% = NPR 1,977.58
• If held < 365 days (7.5% rate): NPR 39,551.50 × 7.5% = NPR 2,966.36

Holding the shares for more than one full year saved the investor nearly NPR 1,000 in direct tax on a single 200-share transaction!

What Happens If You Sell at a Loss?

If your Net Sales Consideration is lower than your total purchase cost, your net capital gain is zero or negative. No Capital Gains Tax is charged on loss-making trades. Furthermore, within the same fiscal year, your broker's system offsets capital losses against capital gains from other profitable trades executed through that same brokerage account.