Income Tax Rates in Nepal

S.N.

Income Level(NRP)

Tax Rate FY  2080/81

1

Upto6,00,000

1%

2

Next 2,00,000

10%

3

Next 3,00,000

20%

4

Next 9,00,000

30%

5

Next 30,00,000

36%

6

Above 50,00,000

39%

Natural person is working in remote area entitled for remote area allowance

Additional deduction from taxable amount up to Rs 50,000. (A-50,000, B-40,000, C-30,000, D-20,000, E-10,000).

Natural person with pension income included in the taxable income

Additional deduction equal to 25% of the amount prescribed under the first tax band or actual pension receipts, whichever is lower shall be allowed from taxable income.

Incapacitated natural person

Additional deduction from the taxable amount equal to 50% of the amount prescribed under the first tax band or actual income whichever is lower.

Life insurance premium

A natural person who has procured life insurance and paid the premium amount thereon shall be entitled to a deduction from the taxable income the lower of the actual annual insurance premium or Rs 40,000 (Previous FY 2021-22: Rs 25,000 or actual)

Medical insurance

A natural person who has insured with a resident insurer/insurance company for health insurance shall be entitled to a deduction from the taxable income the lower of the actual premium paid or Rs 20,000.

Insurance of private building

A resident natural person who has insured a private building in his/her ownership with a resident insurer/insurance company shall be entitled to a deduction of the actual annual premium paid for such insurance or Rs 5,000 whichever is lower

Contribution to Approved Retirement Funds

In case of contribution to the Social Security Fund (SSF)

 - 1/3rd of taxable income or Rs 500,000 or Actual contribution whichever is lower.

In case of contribution to other approved retirement funds but not in SSF

 - 1/3rd of taxable income or Rs 300,000 or Actual contribution whichever is lower.

In case of the employee employed at the foreign diplomatic mission of Nepal

Only 25% of the foreign allowances are to be included in the income from employment.

Compensation received against a deceased natural person

Any compensation received against the deceased natural person is not required to be included in income.

Foreign tax credit

If any resident person has paid tax on income outside Nepal, such person can claim the foreign tax credit and while claiming such credit each country has to be considered separately. The amount of credit shall be lower of

i.                    The total foreign income included in assessable income in Nepal as multiplied by the average rate of tax on total income or

ii.                  ii. The actual tax paid in a foreign country.

Medical Tax credit

Resident Natural Person is entitled to Medical Tax Credit at least of following amounts i.e.  Rs 750 or

 ii.15% of Medical Expenses along with any carried forward from the previous year or iii. Actual tax liability

Female Tax credit

In the case of resident individual women having only remuneration income, the tax credit of 10% on the tax liability shall be available if she has opted for taxability under other natural person only. This credit is not applicable for women who have opted for couple status for tax purposes.

- A natural person with only gains from the disposal of Non-Business Chargeable Assets (NBCA), may         opt not to file the income tax return under Section 96.

 - A natural person other than sole proprietor with income solely from income from vehicle on hire is not required to file the income tax return.

 - However, a natural person having taxable income exceeding Rs 4 million during an Income Year shall submit an income return under Section 96.

- A resident natural person having only income as per subsection 6(Kha), 6(Ga), 6(Gha) of section 95 (ka) shall not be required to file an income tax return.

S.N.

Nature

FY 2080/81

1

Income earned from normal transactions.

25% flat Rate

2

Income earned from providing shipping, air transport or telecommunication services, postage, satellite, optical fiber project.

5%

3

Income earned from providing shipping, air transport or telecommunication services through the territory in Nepal.

2%

4

Repatriation by Foreign Permanent Establishment.

5%

S.N.

Description

FY 2080/81

1

Income earned by the natural person engaged in a special industry  Section 11 for the whole year

Tax @ 20% on taxable income for which a tax rate of 30% is applicable.

2

Income earned from export by natural person

Tax @ 15% on taxable income for which tax rates of 20% and 30% applicable.

In the case of export income from manufacturing, an additional 50% rebate on the tax amount derived after applying the above concessional rate

3

Taxable income of a trust

-          acquiring an estate of a decreased residential individual; or

-          Of an incapacitated resident individual for an income year.

Tax rate as applicable to Natural Person.

S.N.

Natural person engaged in

FY 2080/81

Turnover exceeding

Rs 3 million and up to Rs 5 million

Turnover exceeding

 Rs 5 million and up to Rs 10 million

1

Gas, cigarette business doing transaction with 3% margin or commission

0.25%

0.30%

2

Other person except those involved in the business as above (a)

1%

0.80%

3

Person engaged in service business except for the doctor, engineer, auditor, player, actor or consultant.

2%

2%

Description

FY 2080/81

Metropolitan, Sub-Metropolitan

Rs. 7500

Urban Municipality

Rs.4000

Rural Municipality

Rs. 2500

Annual Turnover

Tax Rebate on applicable tax

Up to Rs 3 million

(natural person taxpayers having annual turnover up to Rs 3 million and Taxable Income up to Rs 0.3 million covered u/s 4(4))

75%

Rs 3 million - 10 million

(natural person taxpayers whom turnover based tax is applicable u/s 4(4Ka))

50%

S.N.

Particulars

FY 2080/81

Normal Rates

Rebates

Applicable Rates

1

Normal Business

25%

-

25%

2

Entities operating as Special Industry under section 11 for whole year

25%

20%

20%

3

Entities constructing and operating ropeway, cable car or sky bridge

25%

40%

15%

4

Entities constructing and operating roads, bridges, tunnel, railway, and airports

25%

50%

12.5%

5

Entities operating trolley bus or trams

25%

40%

15%

6

Entities with export income from source in Nepal

25%

20%

20%

7

Entities involved in construction or operation of public infrastructure and to be transferred to the GoN or involved in the construction of hydropower house and its generation and transmission.

25%

20%

20%

8

Banks and financial institutions (Commercial Banks, Development Banks and Finance Companies)

30%

-

30%

9

Entity carrying General insurance business (Nonlife Insurance)

30%

-

30%

10

Entity engaged in petroleum business under Nepal Petroleum Act, 2040

30%

-

30%

11

Entity engaged in the business of cigarette, tobacco, cigar, chewing tobacco, pan masala, alcohol and beer

30%

-

30%

12

Entity engaged in Telecommunication and Internet service

30%

-

30%

13

Entity engaged in Money transfer

30%

-

30%

14

Entity engaged in Capital market business, Securities business, Merchant banking, Commodity futures market, Securities and Commodity broker

30%

-

30%

S.N.

Particulars

FY 2080/81

1.

Concessions based on employment provided

Special industries and information technology industries providing direct employment to 100 or more Nepalese citizens throughout the year

*10 % of AR / NR

Special industries and information technology industries providing direct employment to 300 or more Nepalese citizens throughout the year

*20% of AR / NR

S.N.

Particulars

FY 2080/81

Special industries and information technology industries providing direct employment to 500 or more Nepalese citizens throughout the year

*25% of AR / NR

Special industries and information technology industries providing direct employment to 1000 or more Nepalese citizens throughout the year

*30 % of AR / NR

* Additional 10% concession is provided if direct employment is provided to 100 or more Nepalese citizens including at least 33% of women, oppressed or handicapped person.

2.

Concessions to Special industries based on geographical locations

Special industries established in very undeveloped areas

90% of the AR (for 10 yrs from the date of commercial production)

Special industries established in undeveloped areas

80% of the AR (for 10 yrs from the date of commercial production)

Special industries established in less developed areas

70% of the AR (for 10 yrs from the date of commercial production)

Income derived by special industries established in Karnali province and hilly districts of the far western province providing direct employment to more than 100 Nepalese citizens

100% tax exemption for the first 15 years from the date of commencement of commercial production or transaction.

3.

Concessions to Special industries based on investment amount

Special industry and tourism industry (except casino) established with a capital investment of Rs 1 billion or more and providing direct employment to more than 500 persons throughout the year

100% exemption for the first five years from the date of operation of the business and 50% concession for the next 3 years

For the existing special and tourism industry (except casinos) that increases its installed capacity at least by 25% to reach a capital of Rs 2 billion, and provides direct employment to more than 300 persons throughout the year

100% concession for the first 5 years and 50% concession for the next 3 years on income generated due to increased capacity

Industry related to tourism industry or international flight operation established with a capital investment of more than Rs 1 billion.

100% concession for 5 years from the commencement of business and 50% concession for the next 3 years

Industry related to tourism industry or international flight operation established with a capital investment of more than Rs 3 billion.

100% concession for 10 years from the commencement of business and 50% concession for the next 5 years

Industry related to tourism industry or international flight operation established with a capital investment of more than Rs 5 billion.

100% concession for 15 years from the commencement of business

S.N.

Particulars

FY 2080/81

4.

Concessions to industry established in SEZ

Industry established in 'Special Economic Zone' in mountain areas or hill areas by the GON

100% exempt up to 10 years from the date of operation of the business and 50% rebate in subsequent years

Industry established in 'Special Economic Zone' in mountain areas or hill areas by the GON

100% exempt up to the first 5 yrs from the date of operation and 50% rebate in subsequent years

Dividends distributed by the industry established in special economic zone

100% exempt up to the first 5 yrs from the date of operation and 50% rebate in subsequent years

Income derived by the foreign investors from investing in ‘Special Economic Zone’ (Source of income-use of foreign technology, management service fee and royalty)

50% of NR

Special industries in operation after establishment in or relocation to Industrial area and industrial gram.

50% rebate on AR for the first 3 years from the production date after establishment or relocation and 25% rebate for the next 5 years

5.

Concessions based on establishment in special area

Entity established in zoological, geological, Biotech park and IT Park engaged in Software development, or data processing, or Cyber Café, or Digital Mapping

50% on NR

Special industries in operation after relocation from Kathmandu valley to outside valley

100% exemption shall be provided for 3 years and 50% rebate for the next 2 years from the date of such relocation and operation.

6.

Concession related to hydropower project

Person or entity having a license to generate, transmit or distribute electricity shall be provided concession if the commercial operation commences before mid-April 2027 (Chaitra end 2083).

100% exempt up to 10 years and 50% rebate in subsequent 5 years from the date of commercial production

Reservoir or semi reservoir-based hydropower projects generating above 40 MW (reduced from the previous limit of 200 MW) of energy and managing financial closure by mid-April 2029

100% exempt for the first 15 years from the date of commencement of commercial transactions and a 50% rebate for the next 6 years

S.N.

Particulars

FY 2080/81

7.

Concession to Petroleum Industry

If a person is involved in the exploration and extraction of minerals, petroleum products, natural gas, and fuel and starts commercial operation by BS 2080 Chaitra end.

100% exempt up to 7 years and 50% rebate in subsequent 3 years

8.

Other Specific concessions

On capitalization of accumulated profit through bonus share by Special Industry or industry related with tourism for expansion of capacity of industry

No tax on dividend distribution

Income from export of goods manufactured by manufacturing based industry having source in Nepal during any income year

Additional 50% rebate on AR.

Income of Manufacturing Industry, tourism service industry and hydropower generation, distribution and transmission industry listed in the capital market and entities mentioned in section 11 (3 Ga)

15% on AR/NR

Private company with a capital of Rs 50 crore or more which conducts its operation by converting into a public company

10% on AR / NR for 3 years from the date of conversion

- Domestic tea production and processing industry, Dairy industry, Garments industry

50% on AR

Health institutions operated by a community-based organization

20% on NR

Micro entrepreneurial industry

100% on NR for 7 years from the date of operation.

Micro entrepreneurial industry under the entrepreneurship of woman

100% on NR for 10 years from the date of operation

Industry established in very undeveloped and undeveloped areas producing brandy, wine, cider from fruits

40% and 25% in case of very underdeveloped and underdeveloped areas respectively on NR for 10 years from the date of operation

Royalty from the export of intellectual asset by a person

25% on NR

Income from the sale of the intellectual asset by a person through transfer

50% on NR

Income derived by the agriculture and forest based cooperatives registered under Cooperatives Act 2074 and the cooperatives operating in a rural municipality

100% tax exemption as well as no tax on dividend distribution

Income generated from agriculture business, vegetable dehydration business and cold store business by registered firms, companies, partnerships, and organized institutions

100% rebate on AR

Income earned from the sale of raw materials or subsidiary raw materials manufactured in Nepal to special industries in Nepal

20% rebate on AR

Income derived by startup business as prescribed by IRD having annual turnover up to Rs 10 million based on innovative knowledge, skills, technology and methods

100% tax exemption for the first 5 years from the date of commencement of the transaction.

Industry engaged in the manufacture of new products by using only used materials that have a direct impact on the environment as its raw materials.

50% rebate on AR for the first 3 years from the date of commencement of transactions and 25% for the next 2 years

Industry engaged in the manufacture of medical vaccines, oxygen gas and sanitary pad

100% tax exemption for the first 5 years from the date of start of the production and 50% rebate for the next 2 years

Income generated by industry established within mid-July 2025 (Ashad 2082) for manufacturing or assembling electric vehicles

40% tax exemption for the first 5 years from the date of commencement of the commercial transaction.

Income generated by industry was established within mid – July 2025 (Ashad 2082) to manufacture agricultural tools.

100% tax exemption for the first 5 years from the date of commencement of the production. [New Provision]

S.N.

Particulars

FY2080/81

1.

Donation to the tax exempt organizations

5% of the adjusted taxable income whichever is lower.

2.

Expenses incurred for conservation or promotion of historical, religious or cultural heritage, or for construction of public sports infrastructure shall be allowed as a deduction from taxable income up to the prescribed limit.

10% of assessable income whichever is lower.

3.

Contribution to Prime Minister Relief Fund or National Reconstruction Fund established by GoN

Actual amount of contribution.

4.

Seed capital up to Rs 100,000 each contributed for up to 5 startups not related to the contributor shall be allowed as a deductible expense.

Allowable as a deductible expense for tax purposes.

S.N.

Particulars

Installment amount

1.

Up to Poush end

40% of estimated tax

2.

Up to Chaitra end

70% of estimated tax

3.

By  Ashad end

100% of estimated tax

S.N.

Particulars

Installment Amount

1.

Up to Poush end

Tax at the rate specified on the actual transaction up to the 20th of Poush.

2.

Up to Ashad end

The remaining amount of tax is calculated at the rate specified on the estimated transaction amount at Ashad end based on the actual transaction up to the 20th of Ashad.

Particulars

FY 2080/81

Vehicle Tax

Mini  bus , mini truck, water tanker

Rs.8000

Mini tipper

Rs.9000

Truck and bus

Rs.10500

Dozer, Excavator, Roller, Loader, Crane and similar machinery

Rs.15500

Oil tanker, Gas bullet, Tipper

Rs.15500

Car, Jeep, Van , Micro Bus

a.      0 to 1300 cc

Rs.5500

b.      1301 to 2000 cc

Rs.6000

c.       2001 to 2900 cc

Rs.6500

d.      2901 to 4000 cc

Rs.8000

e.      4000 cc to above

Rs.9000

Three wheeler,  Auto Rickshaw, Tempo

Rs.2500

Tractor

Rs.2500

Power Triller

Rs.2000

S.N.

Particulars

FY2080/81

1

Interest income from deposit up to Rs.10000 under ‘Micro finance Program’, ‘Rural Development Bank’, ‘Postal saving Bank’ and Co-operative (u/s-11(2)) in village municipality areas.

Up to Rs.25000

2

Windfall gains

25%

3

Wind fall gains from Literature, Arts, Culture, Sports, Journalism, Science & Technology and Public Administration amount received up to 5 lacs

Nil

4

Payment of rent by resident person having source in Nepal However no TDS on payment of rent to natural person.

10%

5

On dividend paid by the resident entity.

 - To Resident Person

 - To Non Resident Person

5%  for both

6

On payment of gain in investment insurance

5%

7

On payment of gain from unapproved retirement fund

5%

8

On payment of interest or similar type having source in Nepal to natural person

6%

9

Payment for articles published in newspaper

No TDS

11

Interest payment to Resident bank, other financial institutions

No TDS

12

Interregional interchange fee paid to credit card issuing bank

No TDS

13

Interest or fees paid by Government of Nepal under bilateral agreement

No TDS

14

On payment of general insurance premium to resident insurance company

No TDS

15

On payment of premium to non-resident insurance company

1.5%

16

Contract payment exceeding Rs.50000 for a single contract within 10 days.

1.5%

17

Interest & Dividend paid to Mutual Fund

No TDS

18

Payment of consultancy fee:

-          to resident person against VAT invoice

-           to resident person against non VAT invoice

1.5%

1.5%

19

Payment on contract to Non Resident Person

-          On repair of aircraft & other contract

-           Other than above

5%

5%

20

TDS deducted on payment of dividend made by Mutual fund to natural Person

5%

21

TDS on Payment by Resident Person for utilizing services related with Satellite, Bandwidth, Optical Fiber, equipment relating to telecommunications or electric transmission

10%

22

Dividend Paid by Partnership Firm to its Partners

5%

23

Payment for the freight to transportation service or Renting of Transportation vehicle (In case Service provider is Not registered in VAT)

2.5%

24

Payment for the freight to transportation service or Renting of Transpiration vehicle (Service provider Not registered in VAT)

2.5%

25

Payment for the freight to transportation service or renting of Transportation vehicle (Service provider registered in VAT)

1.5

26

Renting of Passenger Vehicle

-          Vat Registration

-          No VAT Registration

1.5%

10%

27

Payment made against question setting, answer evaluation

1.5%

28

Payment to Non Resident Company against Commission paid for Reinsurance

1.5%

29

Payment made to Consumer Committee

1.5%

30

Interest paid by resident bank and financial institution to foreign Bank/FI

10%

31

Encouragement amount received by consumer of good and services for the payment made through payment cards, E-Money (Wallet), Mobile Banking and electronic payment during purchases as per the prevailing laws, no tax shall be deducted.

No TDS

32

Interest on Deposit of Life Insurance Companies

5%

33

Royalty to resident person for Literary articles or write up

1.5%

34

Interest on Loan paid to Foreign Bank/FIs by the reservoir or semi reservoir based Hydropower above 200 MW,

5%

S.N.

Particulars

FY2080/81

1

Profit and Gain from Transaction of commodity future market

10%

2

Payment made against question setting, answer evaluation

15%

3

Payment to Non Resident Company against Commission paid for Reinsurance

1.5%

4

Payment made to Consumer Committee

1.5%

5

Commercial Import of Buffalo, Goat, Sheep, Fresh & Frozen Fish, Fruits,

5% of custom value

6

On Import of Meat, Milk Product, Egg, Honey, Millet, Buckwheat, Junelo, Rice, Wheat Flour, Meslin Flour, Other Flours, Herbs, Sugarcane, Herbal products

2.5%

7

Foreign Currency Exchange service by resident bank for students going abroad for study making payment for language exam and standardized test

15%

8

Interest paid by resident bank and financial institution to foreign Bank/FI

10%

9

In case of the encouragement amount received by consumer of good and services for the payment made through payment cards, E-Money (Wallet), Mobile Banking and electronic payment during purchases as per the prevailing laws, no tax shall be deducted.

No TDS

10

Payment received by a person in foreign currency for providing software or other electronic services of similar nature outside Nepal.

1% To be Collected by Bank/FI/Money T/F

11

Interest on Deposit of Life Insurance Companies

5%

12

Royalty to resident person for Literary articles or write up

1.5%

13

Interest on Loan paid to Foreign Bank/FIs by the Dam or PROR based Hydropower subject to certain condition

5%

14

A resident e-commerce operator while making payment for sale of goods, services or goods & services from its platform

1% To be collected by the E-Commerce Operator

15

Profit and Gain from Disposal of Shares:

In case of Natural Resident Person

-          Listed Shares held for more than 365 days

-          Listed Shares held for 365 days or less

-          Non Listed Shares

Resident Entity

-          Listed share

-          Non listed share

Others

-          Listed Share

-          Non listed share

5%

7.5%

10%

10%

15%

25%

25%

Section

Circumstances

FY 208-/81

117(1)(Ka)

Estimated Income Tax Return under Section 95(1) not filed by the taxpayer

Rs 5,000 or 0.01% of the assessable income whichever is higher

117(1)(Kha)

Advance Withholding Tax Return under Section 95Ka(5) not filed by an advance tax withholding agent

1.5% p.a. on the amount of tax to be withheld

117(1)(Ga)

Income Tax Return under Section 96(1) not filed

Person under Section 4(4): Rs 100 p.m. Others: Higher of: Rs 100 p.m.; or 0.1% p.a. on the amount of inclusion

117(1)(Gha)

Financial Statement is not submitted within the prescribed time by entities under Section 2(Dha) (Exempt Entity)

0.1% p.a. on the amount of receipts

117(2)

Fails to maintain proper documentation for an income year as required by Section 81

For the year during which the documentation is not maintained, calculated as: Higher of: Rs 1000; or 0.1% of the amount of inclusions

117(3)

Withholding Tax Return under Section 90(1) not filed by the tax withholding agent

2.5% p.a. on the amount of tax to be withheld

118(1)(Ka)

Installment tax to be deposited under Section 94 is not made as prescribed

15% p.a. on the outstanding amount

119(1)

Failure to Pay Tax on or before the date on which the tax is payable. Section 119(2): For the purposes of calculating interest payable under Section 119(1), any extension granted under Section 98 is ignored.

15% p.a. on the outstanding amount

119(4)

In case tax has not been paid within the date allowed under Section 110APayment of the outstanding tax in installments

An additional 5% p.a. is levied on the arrears

119Ka

Except as otherwise provided in this Act, a person who fails to comply with this Act or the Rules framed hereunder

Rs 5,000 to Rs 25,000

120(Ka)

Makes a false or misleading statement or omits from a statement made to the Department any matter or thing without which the statement is false or misleading in a material particular, knowingly or recklessly to the Department

100% of the amount of tax short paid

120(Kha)

Makes a false or misleading statement or omits from a statement made to the Department any matter or thing without which the statement is false or misleading in a material particular, but not knowingly or recklessly to the Department

50% of the amount of tax short paid

121

A person who knowingly or recklessly aids or abets another person to commit an offense under Chapter 23 (Section 123 to Section 130), or counsels or induces another person to commit such an offense

100% of the underpayment of tax