Income Tax Rates (FY 2077-78)

1. Personal Income Tax

1.1 For Residents : Natural Person
Particulars Rs. Tax Rate

Assessed as Individual

Upto 4,00,000 1%
Next 1,00,000 10%
Next 2,00,000 20%
Next 13,00,000 30%
Balance Exceeding 20,00,000 36%

Assessed as Couple

Upto 4,50,000 1%
Next 1,00,000 10%
Next 2,00,000 20%
Next 12,50,000 30%
Balance Exceeding 20,00,000 36%
A. Deductions on Income
Natural person working in remote areas entitled for Remote Area Allowance Additional deduction from taxable amount up to Rs 50,000. (A-50,000, B-40,000, C30,000, D-20,000, E-10,000).
Natural person with pension income included in the taxable income Additional deduction from taxable amount equal to 25% of amount prescribed under first tax slab or actual pension receipts whichever is lower.
Incapacitated natural person Additional deduction from taxable amount equal to 50% of amount prescribed under first tax slab or actual income whichever is lower.
B. Reduction on Income
Life Insurance Premium A natural person who has procured life insurance and paid premium amount thereon shall be entitled to a reduction of actual annual insurance premium or Rs 25,000 whichever is lower from taxable income
Medical Insurance A natural person who has insured with resident insurer/insurance company for health insurance shall be entitled to a reduction of actual premium paid or Rs 20,000 whichever is lower.
Contribution to Retirement Fund 1/3rd of taxable income or Rs 300,000 or Actual contribution whichever is lower.
C. Rebate on Tax Rates
In case of resident individual women having only remuneration income Rebate of 10% on the tax liability calculated as other natural person. i.e. not applicable for women with couple status.
Retirement payment resulting from Merger In case of decision of the organization to provide group retirement to its employees (in the event of merger or acquisition) except to the payment made as per the employment term or the payment made by retirement fund, a rebate of 50% on withholding tax.
D. Foreign Allowances
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.
E. Tax Exemption
Compensation received against deceased natural person Compensation received against the deceased of natural person is not required to be included in income.
F. Rebated on tax liability
Foreign tax credit If any resident person has paid tax on income outside Nepal, such person can claim foreign tax credit and while claiming such credit each country has to be considered separately.
Amount of credit shall be lower of
i. Total foreign income included in assessable income in Nepal as multiplied by the average rate of tax on total income or
ii. Actual tax paid in foreign country.
Medical Tax Credit Resident Natural Person is entitled to Medical Tax Credit at least of following amounts i. Rs 750 or
ii. 15% of Medical Expenses along with any carried forward from previous year or
iii. Actual tax liability
G. Compulsory Filing of Return
- A natural person with only gains from disposal of Non Business Chargeable Assets (NBCA), may opt not to file the income tax return under Section 96.
- Natural person other than sole proprietor with income solely from income from vehicle on hire 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 income return under Section 96.
1.2 For Non-Residents
Nature of Transaction Tax Rates
Income earned from normal transactions 25% flat rate
Income earned providing shipping, air or telecom services, postage, satellite and optical fiber project 5%
Income earned providing shipping, air or telecom services through the territory of Nepal 2%
Repatriation of profit by Foreign Permanent Establishment 5%
1.3 Special provisions for Resident Natural Person
Particulars Tax Rates
Income earned by natural person engaged on special industry under Section 11 for whole year Tax @ 20% on taxable income for which tax rate of 30% is applicable.
Income earned from export by natural person Tax @ 15% on taxable income for which tax rates of 20% and 30% applicable
Taxable income of a trust:
- acquiring an estate of a deceased resident individual; or
- of an incapacitated resident individual for an income year.
Tax rate as applicable to Natural Person.

2. Business Income Tax

2.1 Tax rates for Entity- Company/Firm/Industry
# Particulars Normal Rate Consession Applicable Rate*
1 Normal business 25% 25%
2 Entity operating as Special Industry under section 11 for whole year 25% 20% 20%
3 Other entities involved in business of operating (after construction) of ropeway, cable car, railway, tunnel or sky bridge 25% 20% 20%
4 Entity investing and operating trolley bus or trams 25% 52% 12%
5 Entity involved in construction and operation of airport 25% 40% 15%
6 Entity operating trolley bus or trams 25% 20% 20%
7 On transactions of cooperatives (other than tax exempted transactions) registered under Cooperative Act, 2074) (sub-metropolitan/metropolitan cities, respectively) 20% 50% 20%
8 On transactions of cooperatives (other than tax exempted transactions) registered under Cooperative Act, 2074) (municipality) 20% 75% 5%
9 Taxable income of Export of entity having income source from Nepal 25% 20% 20%
10 Entity those involved in construction or operation of public infrastructure and to be transferred to Nepal Government or involved in construction of hydropower house and its generation and transmission. 25% 20% 20%
11 Entity involved in the construction and operation of road, bridge or tunnelway 25% 52% 12%
12 Banks and financial institutions (Commercial Banks, Development Banks and Finance Companies) 30% - 30%
13 Entity carrying General insurance business (Non-life Insurance) 30% - 30%
14 Entity engaged in petroleum business under Nepal Petroleum Act, 2040 30% - 30%
15 Entity engaged in business of cigarette, tobacco, cigar, chewing tobacco, pan masala, alcohol and beer 30% - 30%
16 Entity engaged in Telecommunication and Internet service 30% - 30%
17 Entity engaged in Money transfer 30% - 30%
18 Entity engaged in Capital market business, Securities business, Merchant banking, Commodity future market, Securities and Commodity broker 30% - 30%
2.2 Tax Concessions and Rebate on Business Income
# Particulars Consession
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
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 locations
Special industries established in very undeveloped areas 90% of the AR (for 10 yrs from the year of establishment)
Special industries established in undeveloped areas 80% of the AR (for 10 yrs from the year of establishment)
Special industries established in under developed areas 70% of the AR (for 10 yrs from the year of establishment)
3 Concessions to Special industries based on investment amount
Special industry with capital of Rs 1 billion or more and providing direct employment to more than 500 persons throughout the year 100% exemption for first five years from the date of operation of business and 50% concession for next 3 years
For special industry existing at the advent of this Section, if capital is increased to Rs 1 billion, installed capacity is increased by 25% and provided direct employment to more than 500 persons throughout the year 100% concession for first 5 years and 50% concession for next 3 years on income generated due to increased capacity
Industry related to tourism industry or international flight operation established with capital investment of more than Rs 2 billion 100% concession for 5 years from commencement of business and 50% concession for next 3 years
For industry related to tourism industry or international flight operation existing at the advent of this Section, if capital is increased to Rs 2 billion and installed capacity is increased by 25% at minimum 100% concession for 5 years and 50% concession for next 3 years on income generated due to increased
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 yrs from date of operation of business and 50% rebate in subsequent years
Industry established in 'Special Economic Zone' other than above locations 100% exempt up to first 5 yrs from date of operation and 50% rebate in subsequent years
Dividend distributed by the industry established in special economic zone 100% exempt for first 5 years and 50% rebate in subsequent 3 yrs
Income derived by the foreign investors from investment in ‘Special Economic Zone’ (Source of income-use of foreign technology, management service fee and royalty) 50% of NR
5 Concessions based on establishment in special area
Entity established in Technology park, Bio tech park and IT Park engaged in Software development or, data processing or, Cyber Café or, Digital Mapping 50% on NR
6 Concession related to hydropower project
Person or entity having license to generate, transmit or distribute electricity shall be provided concession if the commercial operation commences before BS 2080 Chaitra End.
(Provisions shall be applicable for electricity generated from solar, wind or organic material)
100% exempt up to 10 years and 50% rebate in subsequent 5 years
7 Concession to Petroleum Industry
If person involved in exploration and extraction of petroleum, natural gas 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 manufactured goods by Manufacturing Industries Additional Concession of 25% on rate derived after normal concession
Income of Manufacturing Industry, tourism service industry and hydropower generation, distribution and transmission industry listed in capital market and entities mentioned in section 11 (3 Ga) 15% on AR/NR
Private company with capital of Rs 50 crore or more which conducts its operation by converting into 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 institution operated by community based organization 20% on NR
Micro entrepreneurial industry 100% on NR for 5 years from the date of operation
if it is under entrepreneurship of woman concession of 100% on NR for 7 years from the date of operation
Industry established in least developed areas producing brandy, wine, cider from fruits 40% on NR for 10 years
Royalty from export of intellectual asset by a person 25% on NR
Income from sale of intellectual asset by a person through transfer 50% on NR

3. Allowable Deductions

# Particulars Deduction
a Donation to tax exempt organization Up to Rs 100,000 or 5% of adjusted taxable income whichever is lower.
b For conservation or promotion of historical, religious or cultural heritage, or for construction of public sports infrastructure
On prior approval of department
Actual up to Rs 1 million or 10% of assessable income whichever is lower.
c Contribution to Prime Minister Relief Fund or National Reconstruction Fund established by Nepal Government Actual amount of contribution

4. Presumptive Taxation

4.1 Vehicle Tax
Particulars Tax Amount
Vehicle Tax (Note *)
Minibus, Mini Truck, Water Tanker Rs 6,000
Mini Tripper Rs 7,000
Truck and Bus Rs 8,000
Dozer, Excavator, Roller, Loader, Crane and similar machineries Rs 12,000
Oil tanker, Gas bullet, Tipper Rs 12,000
Car, Jeep, Van, Micro Bus
(a) 0 to 1300 cc Rs 4,000
(b) 1301 to 2000 cc Rs 4,500
(c) 2001 to 2900 cc Rs 5,000
(d) 2901 to 4000 cc Rs 6,000
(e) 4001cc and above Rs 7,000
Three Wheeler, Auto Rickshaw, Tempo Rs 2,000
Tractor Rs 2,000
Power Tiller Rs 1,500
Note:
*Schedule 1(1) (13): If the owner of the vehicle is a natural person (other than registered individual firm), the tax so paid shall be final.
4.2 Resident natural person/Private Firms having business income upto Rs 20 Lacs [section 4(4)]
Particulars Tax Amount Effective Rate (90% Rebate)
Metropolitan, Sub-Metropolitan Rs 7,500 Rs 750
Municipal Areas Rs 4,000 Rs 400
Other than municipal areas Rs 2,500 Rs 250
Note: Conditions for turnover taxation[section 4(4)]:
This includes the resident natural person meeting the following criteria:
(a) Annual transaction not more than Rs 20 Lacs and annual profit up to Rs 200,000.
(b) Not registered in VAT.
(c) Only Nepal source income from business in that fiscal year.
(d) Medical credit not claimed under Section 51.
(e) Advance tax not claimed under Section 93.

4.3 Resident natural person/Private Firms having business income exceeding Rs 20 Lacs but less than Rs 50 Lacs [section 4(4ka)]
Natural person engaged in Tax Rates Effective Rate (75% Rebate)
Gas, cigarette business doing transaction with 3% margin or commission 0.25% of transaction amount 0.0625%
Other person except those involved in business as above 0.75% of transaction amount 0.1875%
Person engaged in service business except doctor, engineer, auditor, player, actor or consultants 2% of transaction amount 0.5%
Note: Conditions for turnover taxation[section 4(4ka)]:
(a) Person having income from business only.
(b) Having turnover of business more than Rs 20 Lacs but less than Rs 50 Lacs.
(c) Person not registered with VAT.
(d) Natural person not having income from consultancy or specialized services such as those provided by doctor, engineer, auditor, lawyer, player, actor or consultants.

5. Special Rebate

Tax Payer Category Condition Tax Rebate
1. Person paying tax u/s 4(4) Transaction Up to 20 Lakhs or Income up to Rs 2 Lakhs 90%
1. Person paying tax u/s 4(4ka) More than 20 Lakhs, up to 50Lakhs 75%
1. Any Person Up to 1 Crore 50%
4. Hotel, Trekking, Travels, Cinema Industry, Party palace, Media House, Transportation and Air Transport Service having transaction More than 1 Crore Around 96% (Only 1% Tax to pay)