Realty transactions: Collection of capital gains tax up more than two-fold
KATHMANDU, AUG 24 -Collection of capital gains tax on realty transactions increased more than two-fold in the last fiscal year 2011-12 compared to the previous year 2010-11.
According to the Department of Land Reforms and Management (DoLRM), the government took in Rs 367.3 million in capital gains tax last year, up from Rs 166.5 million in the previous fiscal year. The tax is imposed on the gain in value of the property that has been sold and is imposed on transactions worth more than Rs 3 million.
The rise in capital gains tax in the last fiscal is in line with the rise in registration fees collected in the same year. Collection of land and house registration fees increased 19.43 percent to Rs 4.14 billion in fiscal 2011-12 compared to the previous fiscal year. Despite the tax rate being slashed in half last year, collection of capital gains tax increased impressively.
The government cut the tax on property resold within five years to 5 percent from 10 percent. Likewise, the tax rate was reduced to 2.5 percent from 5 percent on property resold after five years.
“I have no confirmation of an increase in the collection of capital gains tax from the realty sector,” said Shata Raj Subedi, joint secretary at the Finance Ministry. “If the collection has increased, it is due to an improvement in realty transactions last year.”
According to the ministry, overall capital gains tax has dropped to Rs 510 million in FY 2011-12 from Rs 880 million in the previous fiscal 2010-12. “The collection from the share market is disappointing,” said Subedi. The total capital gains tax collection has been decreasing continuously over the last three years along with a slowdown in the share market. The total capital gains tax collection was Rs 1.05 billion in FY 2009-10, according to the ministry. This tax is particularly imposed on transactions of realty and shares.
Officials at the DoLRM said that the collection has remained poor as a majority of the people put down a lower value on paper. “Given the threshold of Rs 3 million, people tend to write the transaction value below that limit,” said Rohit Kumar Bhattarai, director at the DoLRM.
According to the department, capital gains tax has been collected from only 15 offices. The highest collection of Rs 142.68 million was recorded at the Land Revenue Office (LRO), Kalanki followed by the LRO in Dilli Bazaar, Kathmandu which earned Rs 109.1 million.
The DoLRM has suggested to the Finance Ministry to reduce the threshold to Rs 2 million, and charge capital gains tax only on the amount above that limit. Currently, taxpayers have to pay tax on the entire gain made while selling the property.
“Such a policy will encourage people to show the actual value of the transaction and help in collecting revenue from more taxpayers,” said Bhattarai.
Source:kathmandupost