KATHMANDU, Dec 31: The government’s earnings from interest tax declined by 15.76 percent in the first five months of the current fiscal year (FY), thanks to a heavy fall in the interest rates of banks and financial institutions (BFIs).
According to the Ministry of Finance (MoF), the government earned Rs 12.61 billion from tax imposed on interest earned by depositors of the BFIs during mid-July and mid-December this year. The revenue collection under the same heading was Rs 14.97 billion in the corresponding period of FY 2024/25, while the figure was Rs 17.27 billion in FY 2023/24.
Revised interest rate corridor system introduced
The government has been imposing a five percent tax on the interest earned on bank deposits. The interest rates have been declining for the past few years due to excessive liquidity with the BFIs amid slowdown in credit expansion due to the protracted economic downturn.
Commercial banks have fixed the interest rates on deposit at as low as 5.53 percent. Until around two years ago, the interest rate on deposits used to stand at double digits.
