NSIA submits budget recommendations for upcoming FY 2025/26

KATHMANDU: Nepal Sharemarket Investors Association (NSIA) has submitted a series of recommendations to the Ministry of Finance (MoF) for the preparation of budget for fiscal year 2025/26. The proposals have been put forward on behalf of more than 6.8 million general investors across the country.

NSIA has recommended that the capital gains tax collected from the share market should be finalised, with corresponding adjustments made to the tax laws. It also suggests that banks be permitted, with the approval of Nepal Rastra Bank (NRB), to provide wholesale loans to brokers for margin lending transactions. Brokers should, in turn, be allowed to offer retail loans to investors under the oversight of the Securities Board Nepal (SEBON) and the Nepal Stock Exchange (NEPSE), while maintaining the prescribed spread rate.

The association further proposes that if remittance income is employed to operate productive, service- or trade-oriented enterprises in the real sector, a tax exemption of at least five years should be granted. Similarly, if shares in a company are sold and the sales proceeds and profit are reinvested in the same company for no less than two years, a 50% tax exemption should be applied to the profit. NSIA calls for non-resident Nepalis (NRNs) to be afforded access to the share market and, in cases where they invest directly in the real sector, a tax exemption of at least five years should be provided.

NSIA also recommends that metropolitan cities, municipalities and rural municipalities be enabled to operate infrastructure projects under a public-private partnership model, issue municipal bonds for such projects and adopt the Build-Own-Lease-Transfer (BOLT) system. In addition, the association suggests that when members of the general public purchase more than 100,000 units during the initial offering of mutual funds and retain them for up to two years, a provision for a percentage-based tax exemption on the applicable capital gains tax should be introduced. The shareholding of the general public in companies where the Government of Nepal holds a majority stake should also be increased.

Further recommendations include permitting private sector-established public companies to raise capital through Pre-IPO and crowdfunding mechanisms under the supervision of SEBON. NSIA recommends that the annual profit or loss from share market transactions be calculated so that a net loss can be offset against other business losses in subsequent fiscal years. In order to bolster the commodity market, the association advises the development of quality and warehouse systems and the establishment of a commodity market exchange, and calls for studies on the creation of a foreign currency market and exchange.

NSIA also proposes that a Capital Market Exhibition be organised twice a year under the leadership of SEBON, with the involvement of the private sector and investors' associations, with a dedicated budget allocated for the event. Merchant bankers and Portfolio Valuation Companies (PVC) are urged to be encouraged to develop innovative and creative products for companies in the real sector. Finally, NSIA suggests that NEPSE lead the creation of a vigilance system to prevent malpractices such as insider trading, circular trading, cornering and pump and dump schemes.

NSIA has submitted these suggestions in the hope that the Ministry of Finance will take them into consideration during the budget formulation process for upcoming fiscal year.