Kathmandu-The new capital gains tax and revised personal income tax system announced through the government's budget for the current fiscal year came into effect on Friday, the first day of the Nepali month of Shrawan.

Under the new capital gains tax provision, short term investors will now pay a 10 percent tax on profits earned from share transactions.

Likewise, long term investors who sell shares after holding them for more than one year will be subject to a 7.5 percent capital gains tax.

Previously, the capital gains tax rate stood at 7.5 percent for short term investors and 5 percent for long term investors. The 10 percent capital gains tax applicable to companies and institutions remains unchanged.

The government has also revised the personal income tax slabs, with the new rates taking effect from  Friday.

Under the revised system, annual taxable income of up to Rs 1 million will be subject to a one percent Social Security Tax, which serves as the minimum tax.

Annual income between Rs 1,000,001 and Rs 1.5 million will be taxed at 10 percent. Income between Rs 1.5 million and Rs 2.5 million will be taxed at 20 percent. Income between Rs 2.5 million and Rs 4 million will attract a 27 percent tax.

Any annual income exceeding Rs 4 million will be taxed at the maximum rate of 29 percent.

The revised structure replaces the provisions under the previous Income Tax Act, 2002.

Under the earlier system, annual income of up to Rs 500,000 for individuals and Rs 600,000 for couples was subject only to a one percent Social Security Tax.

Income above that threshold was taxed progressively, with 10 percent on the next Rs 200,000, 20 percent on the following Rs 300,000, 30 percent on the next Rs 1 million, and 36 percent on the subsequent Rs 3 million. Annual income exceeding Rs 5 million was taxed at the highest rate of 39 percent.

The new fiscal year's tax regime revises both the tax rates and the income thresholds.