Selling land or a house in Nepal now costs more in tax than it did a year ago. Budget 2083/84 pushed capital gains tax (CGT) on real estate transactions higher across the board, and the Land Revenue Office withholds it directly at the registration counter — before you ever see the sale proceeds. Here is exactly how the new rates work, who is exempt, and what documents you need ready to avoid a dispute over valuation.
CGT Basis for Land and Building Transactions in Nepal
Capital gains tax on real estate is charged on the profit from selling a "non-business chargeable asset" — land, a private building, or both — held by a resident natural person outside the course of running a registered business. The gain is calculated as the transaction value minus the original acquisition cost and eligible improvement or transfer-related expenses. Crucially, the transaction value used for tax purposes is the higher of the actual registered deed price or the government-notified Malpot valuation for that area, so undervaluing a deed does not reduce your tax exposure.
Rate Structure by Holding Period (Short vs Long Term)
Under the Finance Act 2083, effective from Shrawan 1, 2083 (mid-July 2026), the applicable rates for a resident natural person are:
Held 5 years or more (long-term): 7.5% of the gain.
Held less than 5 years (short-term): 10% of the gain.
As with shares, the structure rewards patience — holding a property for at least five years before selling reduces the effective tax rate on your profit by 2.5 percentage points compared to a quicker flip.
Distinction Between Land-Only and Land-with-Building Sales
When land and a building on it are sold together, the Malpot office values each component separately using its own notified rate schedule — land is valued by location, road access, and plot characteristics, while the building is valued by construction type, age, and depreciated replacement cost. Your cost base similarly needs to be split: the original land purchase price plus any registered construction cost for the building. Selling land alone, with no structure, is valued purely on the land schedule, which tends to make the CGT computation simpler but the valuation itself more sensitive to road-width and zoning classification.
Role of the Land Revenue/Registration Office in Withholding Tax at Registration
Unlike salary or business income tax, CGT on property is not something you calculate and pay separately later — the Land Revenue Office (Malpot Karyalaya) computes and withholds it as advance tax at the moment the transfer deed is registered, under Section 95Ka(6) of the Income Tax Act. You cannot complete the registration without settling this amount, so in practice most sellers experience it as a deduction from what the buyer's payment ultimately nets them, or a separate cash payment required on the day of registration.
Exemptions — Primary Residence, Inherited Property, Government Acquisition
A few situations reduce or eliminate the CGT liability:
Involuntary government acquisition: Property compulsorily acquired by the government for a public project now attracts a concessional 2.5% rate rather than the standard 7.5%/10% bands.
Donation to government: Land or a private building donated free of cost to the Government of Nepal, a Provincial Government, or a Local Government is fully exempt from CGT under Section 95Ka(5Ka).
Small transactions: Property sold for less than the statutory minimum threshold is generally excluded from the definition of a non-business chargeable asset and falls outside CGT altogether.
Inherited property: Inheritance itself does not trigger CGT at the point of transfer to the heir; tax applies later when the heir eventually sells, based on a cost basis carried forward under the applicable succession rules.
Documentation Needed to Support the Exemption Claim
To claim any exemption or concessional rate, keep the following ready at the Malpot office: citizenship or PAN documents of both parties, the original registration/ownership certificate (lalpurja), proof of the original acquisition cost (an earlier registered deed or gift/inheritance record), receipts for any capital improvements you want counted in the cost base, and, for government-acquisition cases, the official acquisition order or notice. Missing acquisition-cost documentation is the single biggest reason sellers end up taxed on a larger gain than they actually made, since the office defaults to treating the entire sale value as gain when the original cost cannot be verified.
Common Disputes Between Taxpayers and IRD on Valuation
The most frequent friction point is the gap between what a buyer and seller actually agreed to pay and the government's notified Malpot rate for that road or ward, which is revised annually on Shrawan 1. Because tax is charged on the higher of the two, sellers in fast-appreciating neighbourhoods sometimes find the notified valuation has already caught up with or exceeded their actual sale price, pushing the taxable gain — and the tax bill — higher than expected. A second common dispute involves construction cost for buildings, where sellers who built without full documentation struggle to substantiate their claimed cost base and end up assessed on a larger gain by default.
FAQs — CGT for NRNs (Non-Resident Nepalis) Selling Property
Q: Do the same 7.5%/10% rates apply to Non-Resident Nepalis?
NRN and other non-resident sellers are generally subject to a separate non-resident withholding framework rather than the resident natural-person bands described here, and rates can differ. Confirm your specific status with the Malpot office or a tax advisor before the transaction.
Q: Can an NRN seller repatriate the net sale proceeds after tax?
Repatriation of property sale proceeds by an NRN typically requires Nepal Rastra Bank approval and supporting documentation, separate from the CGT settled at registration.
Q: Is a Power of Attorney required if the NRN cannot be present for registration?
Yes — a notarized and, where applicable, embassy-attested Power of Attorney is standard practice for NRN sellers completing a sale through a representative in Nepal.
Note: Rates and provisions are drawn from the ICAN Highlights of Federal Budget 2083/84 and Finance Bill 2083, effective Shrawan 1, 2083. Property tax is highly transaction-specific — confirm figures with your local Malpot office or a registered tax advisor before completing a sale.
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