Income Tax Rates FY 2022-23

1. Personal Income Tax

1.1 For residents: natural person

Tax Banding Tax Rates

Individual FY 2022-23 (FY 2079-80) FY 2021-22 (FY 2078-79)
(a) Band 1 First 500,000 1%* First 400,000 1%*
(b) Band 2 Next 200,000 10% Next 100,000 10%
(c) Band 3 Next 300,000 20% Next 200,000 20%

(d) Band 4 Next 1,000,000 30% Next 1,300,000 30%

(e) Additional Tax Remaining above 2,000,000 36%** Remaining above 2,000,000 36%**
Couple/Married
(a) Band 1 First 600,000 1%* First 450,000 1%*
(b) Band 2 Next 200,000 10% Next 100,000 10%

(c) Band 3 Next 300,000 20% Next 200,000 20%

(d) Band 4 Next 9,00,000 30% Next 1,250,000 30%

(e) Additional Tax Remaining above 2,000,000 36%** Remaining above 2,000,000 36%**

*This is the Social Security Tax to be deposited in a separate revenue account (11211) provided for this purpose. However,
taxpayers registered as sole proprietors or on pension income or income from contribution based pension fund shall not attract
social security tax i.e. 1%. And if the taxpayer is depositing the amount in the Social Security Fund (SSF) then for those taxpayers
Social Security Tax is not applicable.
Note:

A. Deductions on Income Remarks

Natural person working in

Additional deduction from taxable amount up to Rs 50,000. (A-50,000, B-40,000, C-
remote areas entitled for
30,000, D-20,000, E-10,000).
Remote Area Allowance
Natural person with pension Additional deduction equal to 25% of the amount prescribed under the first tax band or
income included in the taxable actual pension receipts, whichever is lower shall be allowed from taxable income.
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.
B. Reduction on Income

A natural person who has procured life insurance and paid the premium amount thereon
Life insurance premium 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)

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

A resident natural person who has insured a private building in his/her ownership with
Insurance of private building 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.

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

Contribution to Approved - 1/3rd of taxable income or Rs 500,000 or Actual contribution whichever is lower.
Retirement Fund 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.

C. Foreign Allowances

In case of the employee Only 25% of the foreign allowances are to be included in the income from
employed at the foreign employment.
diplomatic mission of Nepal

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 D. Tax Exemption

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

E. Rebated on tax liability

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
Foreign tax credit
i. The total foreign income included in assessable income in Nepal as multiplied by the
average rate of tax on total income or
ii. The actual tax paid in a foreign country.
Resident Natural Person is entitled to Medical Tax Credit at least of following amounts
i. Rs 750 or
Medical Tax Credit
ii. 15% of Medical Expenses along with any carried forward from the previous year or
iii. Actual tax liability

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
Female Tax Credit
under other natural person only. This credit is not applicable for women who
have opted for couple status for tax purposes.

F. Compulsory Filing

- 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.
** 36% is computed as 30% plus additional 20% on such tax rate applicable to taxable income above Rs 2,000,000.

1.2 For non - residents

# Nature of Transaction FY 2022-23 FY 2021-22

25% flat rate on
a. Income earned from normal transactions No change
taxable income
Income earned providing shipping, air transport or telecom services,
b. No change 5%
postage, satellite and optical fiber project
Income earned providing shipping, air transport or telecom services
c. No change 2%
within the territory of Nepal

d. Repatriation of profit by Foreign Permanent Establishment No change 5%

1.3 Special provisions for a resident natural person

# Particulars FY 2022-23 FY 2021-22

Tax @ 20% on
Income earned by a natural person engaged in a special taxable income for
a. No change
industry under Section 11 for the whole year which a tax rate of
30% is applicable.

Tax @ 15% on taxable

Tax @ 15% on taxable
income for which tax
income for which tax
rates of 20% and 30%
rates of 20% and 30%
applicable.
applicable.
In the case of export
In the case of export
b. Income earned from export by a natural person income from
income from
manufacturing, an
manufacturing, an
additional 50%
additional 35%
rebate on the tax
rebate on the tax
amount derived after
amount derived after
applying the above
applying above
concessional rate

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 # Particulars FY 2022-23 FY 2021-22

Taxable income of a trust: Tax rate as

c. - acquiring an estate of a deceased resident individual; or No change applicable to Natural
- of an incapacitated resident individual for an income year. Person.

1.4 Special provision for small taxpayers - resident natural person

i. Presumptive taxpayer: The small taxpayer (resident natural person) having business taxable income and business
transactions not exceeding Rs 300,000 and Rs 3 million respectively during the income year and who meets other criteria
of the presumptive taxpayer shall pay presumptive tax as mentioned in Note 2 below (however, for the FY 2021-22, the
tax rebate has been provided to such taxpayers by Finance Bill 2079 – refer Note 3 below).
ii. Transaction based taxpayer: Similarly, the small taxpayer (resident natural person) who are required to pay tax based
on the business turnover and having business taxable income and business turnover not exceeding Rs 1 million and Rs
10 million respectively during the income year and who meets other criteria of the transaction-based taxpayer shall pay
tax on the basis of turnover as below in addition to the tax computed as per Note 2 below. :

FY 2022-23 FY 2021-22
Turnover
Natural person Turnover Turnover Turnover
# exceeding Rs
engaged in exceeding Rs 5 exceeding Rs 3 exceeding Rs 5
3 million and
million and up to million and up million and up to
up to Rs 5
Rs 10 million to Rs 5 million Rs 10 million
million
Gas, cigarette business
doing transaction with
a. No change No change 0.25% 0.30%
3% margin or
commission

Other person except

b. those involved in the No change No change 1% 0.80%
business as above (a)

Person engaged in
service business
except for the doctor,
c. No change No change 2% 2%
engineer, auditor,
player, actor or
consultant.

Note 1: Conditions for transaction-based taxation:

a) Person is a resident natural person.

b) Person having only Nepal source business income.
c) Having business turnover exceeding Rs 3 million but less than Rs 10 million and having taxable business income less
than Rs 1 million.
d) Not having income from consultancy or specialized services such as those provided by a doctor, engineer, auditor, lawyer,
player, actor or consultant.
Note 2: For turnover up to Rs 3 million (Presumptive Taxpayer)

Particulars FY 2022-23 FY 2021-22

Metropolitan, Sub-Metropolitan No change Rs 7,500*

Urban Municipality No change Rs 4,000*

Rural Municipality No change Rs 2,500*

Conditions for Presumptive Tax Payer

a) Person is a resident natural person.
b) Person having only Nepal source business income.
c) Has not claimed a medical tax credit under section 51 and advance tax credit under section 93.
d) Having taxable business income not exceeding Rs 300,000 and business turnover not exceeding Rs 3 million.

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 Note 3: Rebates to Small taxpayers on tax for FY 2021-22 as provided by Finance Bill 2079 (2022)
Tax rebates on applicable tax rates/presumptive tax amount based on the annual turnover of small taxpayers for FY
2021-22 considering the impact of COVID-19 on business.

Annual Turnover Tax Rebates on applicable tax

a. Up to Rs 3 million
(natural person taxpayers having annual turnover up to Rs 3 million and Taxable 75%
Income up to Rs 0.3 million covered u/s 4(4))
b. Rs 3 million - 10 million
50%
(natural person taxpayers whom turnover based tax is applicable u/s 4(4Ka))

Note 4: Relaxation to small taxpayers as provided by Finance Bill 2079 (2022):

• If the turnover amount declared by presumptive taxpayer u/s 4(4) and turnover based taxpayer u/s 4(4ka) has any
deviations with actual turnover till the FY 2020-21 (FY 2077-78), then such taxpayer can declare the actual turnover for
each year and pay 1.5% tax on differential turnover within 13 April 2023 (Chaitra end 2079). The revised turnover to the
extent as declared and tax of such taxpayer shall be deemed to be final.
• If the taxpayer withdraws the appeals made to various levels (Administrative Review, Revenue Tribunal, or in the Courts)
and deposits 1.5% tax on such differential turnover till 13 April 2023 (Chaitra end 2079), the tax, fees, additional charges
and penalties shall be waived for those presumptive taxpayers and turnover based taxpayer facing assessment under
VAT Act and reassessment under Income Tax Act till 28 May 2022 (14 Jestha 2079)

2. Corporate Income Tax

2.1 Tax rates for entity - company/firm/industry

FY 2022-23 FY 2021-22
# Particulars Normal Applicable Applicable
Rebate
Rate Rate* Rate*
1 Normal business 25% - 25% 25%
Entities operating as Special Industry under
2 25% 20% 20% 20%
section 11 for whole year
Entities constructing and operating ropeway, cable
3 25% 40%** 15%** 15%
car or sky bridge
Entities constructing and operating roads, bridges,
4 25% 50%** 12.5%** 12.5%
tunnel, railway, and airports
5 Entities operating trolley bus or trams 25% 40%** 15%** 15%

6 Entities with export income from source in Nepal 25% 20% 20% 20%

Entities involved in construction or operation of

public infrastructure and to be transferred to the
7 25% 20% 20% 20%
GoN or involved in the construction of hydropower
house and its generation and transmission.
Banks and financial institutions (Commercial
8 Banks, Development Banks and Finance 30% - 30% 30%
Companies)
Entity carrying General insurance business (Non-
9 30% - 30% 30%
life Insurance)
Entity engaged in petroleum business under Nepal
10 30% - 30% 30%
Petroleum Act, 2040
Entity engaged in the business of cigarette,
11 tobacco, cigar, chewing tobacco, pan masala, 30% - 30% 30%
alcohol and beer
Entity engaged in Telecommunication and Internet
12 30% - 30% 30%
service
13 Entity engaged in Money transfer 30% - 30% 30%
Entity engaged in Capital market business,
Securities business, Merchant banking,
14 30% - 30% 30%
Commodity futures market, Securities and
Commodity broker

*Above industry-wise applicable tax rate is presented after considering concession available under section 11 of Income Tax
Act (ITA) except entities falling under tax holiday period. However, in the case of the special industries and industries other than
those presented above, the entity can choose any one tax concession available under section 11 of ITA (summarized in point
2.2 below).
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 **Above rebate and applicable tax rates with respect to entities constructing and operating ropeway, cable car, Sky Bridge,
roads, bridges, tunnel, railway, and airports, trolley buses, and trams are applicable only up to 10 years from the date of
commercial operation.

2.2 Tax concessions and rebates on business income

In the given section, AR stands for Applicable Rate which should be used in the context of Special Industry as the rate after
20% concession given under Section 11(2Kha) and NR stands for Normal Rate in the context of industry / business other than
Special Industry

# Particulars FY 2022-23 FY 2021-22

1. Concessions based on employment provided

Special industries and information technology industries

providing direct employment to 100 or more Nepalese citizens No change *10 % of AR / NR
throughout the year
Special industries and information technology industries
providing direct employment to 300 or more Nepalese citizens No change *20% of AR / NR
throughout the year
Special industries and information technology industries
providing direct employment to 500 or more Nepalese citizens No change *25% of AR / NR
throughout the year
Special industries and information technology industries
providing direct employment to 1000 or more Nepalese No change *30% of AR / NR
citizens throughout the year
* 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
90% of the AR (for
10 yrs from the date
- Special industries established in very undeveloped areas No change
of commercial
production)
80% of the AR (for
10 yrs from the date
- Special industries established in undeveloped areas No change
of commercial
production)
70% of the AR (for
10 yrs from the date
- Special industries established in less developed areas No change
of commercial
production)
- Income derived by special industries established in Karnali 100% tax exemption
province and hilly districts of the far western province for the first 15 years
providing direct employment to more than 100 Nepalese from the date of
citizens No change
commencement of
(The word “Hilly districts of Far Western Province” has been commercial production
added after “Karnali Pradesh” by Finance Bill 2079) or transaction.

3. Concessions to Special industries based on investment amount

100% exemption for

the first five years
- Special industry and tourism industry (except casino)
from the date of
established with a capital investment of Rs 1 billion or more
No change operation of the
and providing direct employment to more than 500 persons
business and 50%
throughout the year
concession for the
next 3 years

100% concession for

the first 5 years and
- For the existing special and tourism industry (except casinos)
50% concession for
that increases its installed capacity at least by 25% to reach a
No change the next 3 years on
capital of Rs 2 billion, and provides direct employment to more
income generated
than 300 persons throughout the year
due to increased
capacity

100% concession for

5 years from the
- Industry related to tourism industry or international flight
commencement of
operation established with a capital investment of more than Rs 1 No change
business and 50%
billion.
concession for the
next 3 years

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# Particulars FY 2022-23 FY 2021-22

100% concession for

10 years from the
- Industry related to tourism industry or international flight
commencement of
operation established with a capital investment of more than Rs 3 No Change
business and 50%
billion.
concession for the
next 5 years

100% concession for

- Industry related to tourism industry or international flight
15 years from the
operation established with a capital investment of more than Rs 5 No Change
commencement of
billion.
business

4. Concessions to industry established in SEZ

100% exempt up to 10
years from the date of
- Industry established in 'Special Economic Zone' in mountain operation of the
No change
areas or hill areas by the GON business and 50%
rebate in subsequent
years
100% exempt up to
the first 5 yrs from the
- Industry established in 'Special Economic Zone' other than
No change date of operation and
the above locations
50% rebate in
subsequent years

100% exempt for the

- Dividends distributed by the industry established in special first 5 years and 50%
No change
economic zone rebate in subsequent 3
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) No change 50% of NR

50% rebate on AR for

the first 3 years from
- Special industries in operation after establishment in or the production date
relocation to Industrial area and industrial gram. No Change 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 No change 50% on NR
Cyber Café, or Digital Mapping
100% exemption shall
be provided for 3
- Special industries in operation after relocation from Kathmandu years and 50% rebate
No Change for the next 2 years
valley to outside valley
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 100% exempt up to 10
(Chaitra end 2083). years and 50% rebate
(Period extended from Chaitra end 2082 to Chaitra end No change in subsequent 5 years
2083) from the date of
commercial production
(Provisions shall be applicable for electricity generated from
solar, wind or organic material)

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# Particulars FY 2022-23 FY 2021-22

- Reservoir or semi reservoir-based hydropower projects 100% exempt for the

generating above 40 MW (reduced from the previous limit of first 15 years from the
200 MW) of energy and managing financial closure by mid-April date of
2029 commencement
No Change of commercial
(Period extended from Chaitra end 2083 to Chaitra end
2085) transactions and a
50% rebate for the
next 6 years

7. Concession to Petroleum Industry

- If a person is involved in the exploration and extraction of 100% exempt up to 7

minerals, petroleum products, natural gas, and fuel and No change years and 50% rebate
starts commercial operation by BS 2080 Chaitra end. in subsequent 3 years

8. Other Specific concessions

- On capitalization of accumulated profit through bonus share by
No tax on dividend
Special Industry or industry related with tourism for expansion of No change
distribution
capacity of industry
- Income from export of goods manufactured by manufacturing- Additional 50% rebate Additional 35% rebate
based industry having source in Nepal during any income year. on AR. on AR.
- Income of Manufacturing Industry, tourism service industry and
hydropower generation, distribution and transmission industry
No change 15% on AR/NR
listed in the capital market and entities mentioned in section 11 (3
Ga)
10% on AR / NR for 3
- Private company with a capital of Rs 50 crore or more which
No change years from the date of
conducts its operation by converting into a public company
conversion

- Domestic tea production and processing industry, Dairy industry,

No change 50% on AR
Garments industry

- Health institutions operated by a community-based

No change 20% on NR
organization

- Micro entrepreneurial industry 100% on NR for 7

No change years from the date of
operation.
100% on NR for 10
- Micro entrepreneurial industry under the entrepreneurship of
No change years from the date of
woman
operation
40% and 25% in case
of very
- Industry established in very undeveloped and undeveloped underdeveloped and
areas producing brandy, wine, cider from fruits No change underdeveloped areas
respectively on NR for
10 years from the date
of operation

- Royalty from the export of intellectual asset by a person No change 25% on NR

- Income from the sale of the intellectual asset by a person

No change 50% on NR
through transfer

- Income derived by the agriculture and forest based 100% tax exemption
cooperatives registered under Cooperatives Act 2074 and No Change as well as no tax on
the cooperatives operating in a rural municipality 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. 50% rebate on AR
[The word ”agricultural business has been replaced by
“agriculture business, vegetable dehydration business and
cold store business”]
- Income earned from the sale of raw materials or subsidiary
raw materials manufactured in Nepal to special industries in No Change 20% rebate on AR
Nepal

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 # Particulars FY 2022-23 FY 2021-22

100% tax exemption

- Income derived by startup business as prescribed by IRD for the first 5 years
having annual turnover up to Rs 10 million based on No Change from the date of
innovative knowledge, skills, technology and methods. commencement of the
transaction.
50% rebate on AR for
the first 3 years from
- Industry engaged in the manufacture of new products by
the date of
using only used materials that have a direct impact on the No Change
commencement of
environment as its raw materials.
transactions and 25%
for the next 2 years

100% tax exemption 100% tax exemption

for the first 5 years for the first 3 years
- Industry engaged in the manufacture of medical vaccines, from the date of start from the date of start
oxygen gas and sanitary pad of the production and of the production and
50% rebate for the 50% rebate for the
next 2 years next 2 years
40% tax exemption
for the first 5 years
- Income generated by industry established within mid-July
from the date of
2025 (Ashad 2082) for manufacturing or assembling electric
commencement of
vehicles
the commercial
transaction.
[Newtax
100% Provision]
exemption
for the first 5 years
- Income generated by industry was established within mid – from the date of
July 2025 (Ashad 2082) to manufacture agricultural tools. commencement of
the production.
[New Provision]
Note:
1. If any entity is entitled to more than one benefit under section 11 of the Income Tax Act, 2058 only one benefit shall be availed.
However, in the case of Special Industries, apart from the concessions of 20% given in section 11(2Kha), any one of the
other benefits available in section 11 can also be availed.
2. Special industry” refers to all the manufacturing industries as classified in section 3 of the Industrial Enterprises Act, 2076
(Annex 10) except the industry related to the manufacturing of cigarette, bidi, cigar, chewing tobacco, tobacco, gutkha,
pan masala other products having the main ingredient as tobacco, alcohol, beer and other such related products but
includes agriculture, forestry and mineral industries.
3. Special Provisions

# Particulars Remarks

For FY 2021-22, tax rebates ranging from 50% to 75% on the

the applicable tax provided to small taxpayers based on
Tax rebates for micro, small and medium
a. annual business turnover. (Refer table in note 3 of point 1.4
enterprises.
above: Rebates to Small taxpayers on tax FY 2021-22 as provided
by Finance Bill 2079)

50 % rebate on applicable tax for FY 2021-22 shall be provided to

Tax rebate and facility to specific
residents for the income derived from the business related to hotel,
b. businesses affected by COVID
travel, trekking, film industry, party palace, media house or
pandemic
transportation and having turnover more than Rs 10 million.

The cooperative operating in Rural Municipality is exempt from

Income Tax. Taxes to be levied at 7.5%, 10% and 15% (Previous
c. Tax rate for cooperatives FY 2021-22: 5%, 7% and 10%, respectively) for cooperatives
operating in Municipality, sub-metropolitan and metropolitan,
respectively.

Income of mutual fund approved by Securities Board of Nepal

d. Tax exemption to mutual fund (SEBON) derived in line with its objective shall be exempted from
tax.
Income of a non-profit motive educational institution established
Tax exemption to Not for profit
e. based on the letter of understanding with GON or related body shall
educational institute
be exempted from tax.

Section 47 (ka) allows merger and acquisition benefits only on

disposals through mergers of BFIs and insurance companies within
the same class. Further, such entities shall register the
f. Benefits for merger and acquisition
memorandum of intent with IRD within 16 July 2022 (Ashad end
2079) and complete the merger/acquisition process within 16 July
2023 (Ashad end 2080).

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4. Allowable Deductions

#. Particulars FY 2022-23 FY 2021-22

Up to Rs 100,000 or 5% of the
a. Donations to tax exempt organizations No change adjusted taxable income
whichever is lower.

Expenses incurred for conservation or promotion of a. On prior approval of IRD

historical, religious or cultural heritage, or for construction b. Actual incurred up to Rs 1
b. No change
of public sports infrastructure shall be allowed as a million or 10% of assessable
deduction from taxable income up to the prescribed limit. income whichever is lower.

Contribution to Prime Minister Relief Fund or National

c. No change Actual amount of contribution
Reconstruction Fund established by GoN

Seed capital up to Rs 100,000 each contributed for up to

Allowable as a deductible expense
d. 5 startups not related to the contributor shall be allowed No Change
for tax purposes
as a deductible expense.

5. Tax Payment
5.1 Advance tax to the normal taxpayer

# Particulars Installment Amount

a. Up to Poush end 40% of the estimated tax

b. Up to Chaitra end 70% of the estimated tax
c. By Ashad End 100% of the estimated tax*
* Amount to be paid under each installment is 90% of the amount of estimate or revised estimate payable as the
installment of tax for each installment period for the year reduced by the amount of each installment paid by the
person for an income year.

Note: It is not required to pay advance tax if the tax payable is less than Rs 7,500.

5.2 Advance tax to the taxpayer based on turnover

# Particulars Installment Amount

Tax at the rate specified on the actual transaction up to

a. Up to Poush end
the 20th of Poush.

The remaining amount of tax is calculated at the

rate specified on the estimated transaction
b. Up to Ashad end
amount at Ashad end based on the actual
transaction up to the 20th of Ashad.

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6. Taxation to Small Taxpayer
6.1 Presumptive taxation

Particulars FY 2022-23 FY 2021-22

Vehicle Tax*
Minibus, Mini Truck, Water Tanker No change Rs 6,000
Mini Tripper No change Rs 7,000
Truck and Bus No change Rs 8,000
Dozer, Excavator, Roller, Loader, Crane and similar machinery No change Rs 12,000
Oil tanker, Gas bullet, Tipper No change Rs 12,000

Car, Jeep, Van, Micro Bus

(a) 0 to 1300 cc No change Rs 4,000

(b) 1301 to 2000 cc No change Rs 4,500
(c) 2001 to 2900 cc No change Rs 5,000
(d) 2901 to 4000 cc No change Rs 6,000
(e) 4001cc and above No change Rs 7,000
Three Wheeler, Auto Rickshaw, Tempo No change Rs 2,000
Tractor No change Rs 2,000
Power Tiller No change Rs 1,500

Rates after applicable rebates for natural persons (Small Tax Payer) having turnover from business not exceeding
Rs 3 Million and taxable income not exceeding Rs 300,000 (Refer to criteria below in Note # below)
FY 2021-22 FY 2020-21
Metropolitan, Sub-Metropolitan Rs1,875** Rs 750
Urban Municipality Rs1,000** Rs 400
Rural Municipality Rs625** Rs 250
Note:

*Schedule 1(1) (13): If the owner of the vehicle is a natural person (other than a registered individual firm), the tax so paid shall be
final.
** Tax rebates of 75% provided through finance Bill 2079 (2022) on presumptive tax amount based on the annual turnover of
small taxpayers for FY 2021-22 considering the impact of COVID-19 on business have been provided.

# Criteria for presumptive taxpayers (resident natural person)

a) Person is a resident natural person.
b) Person having only Nepal source business income.
c) Has not claimed a medical tax credit under section 51 and advance tax credit under section 93.
d) Having taxable business income not exceeding Rs 300,000 and business turnover not exceeding Rs 3 million.

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7. Tax Withholdings
7.1 Tax withholding rates (TDS)

# Nature of Transaction FY 2022-23 FY 2021-22

Interest income from the deposit under 'Micro Finance Program', 'Rural
i. Development Bank', 'Postal Saving Bank & Cooperative (u/s-11(2)) in rural No change Up to Rs 25,000
areas is exempted from tax
ii. Windfall gains No change 25%*
Payment of rent except for house rent to a natural person and except
iii. provided in the serial number (iv) & (v) below, made by resident person** No change 10%

iv. Payment for vehicle hire to VAT registered person No change 1.5%

Payment for freight or rental payment against the lease of carriage vehicle
v. No change 2.5%
relating to the carriage of goods.

vi. Profit and gain from the transaction of commodity future market No change 10%

On returns to be distributed by Mutual Fund:

vii. - Natural person No change 5%
- Other than Natural Person 15%
On Dividend paid by the resident company and partnership firm
viii. - To Resident person No change 5% for both
- To Non-resident Person
ix. On payment of gain from investment insurance No change 5%

x. On payment of gain from an unapproved retirement fund No change 5%

On payment of interest or similar type having source in Nepal by

Resident Bank, Cooperatives, financial institutions or debenture
issuing entity, or listed company
xi. No change 5%
- In case of payment made to natural person [not involved in any
business activity]
- In case of payment made to entities 15%

- On payment of premium to the non-resident insurance company

xii. - On payment of commission relating to reinsurance premium to the non- No change 1.5%
resident insurance company

xiii. Payment against contract or agreement to the non-resident person. No change 5%

xiv. On payment exceeding Rs 5 million made towards the works done No change 1.5%
through the consumer committee

xv. Contract payments exceeding Rs 50,000 No change 1.5%

Payment of consultancy fee/ for procurement of services:

1.5%
xvi. - by a resident person against VAT invoice No change
15%
- by a resident person against Non-VAT invoice

On payment for use of Satellite, Bandwidth, Optical fiber, telecommunication

xvii. equipment or electricity transmission by a resident person irrespective of its No change 10%
location

xviii. On payment of commission No change 15%

On payment of interest by resident BFIs on loans availed in foreign

xix. currency from foreign banks or other financial institutions to invest in the No change 10%
areas as specified by NRB.

Payment of registration fee, educational fee, or exam fee to foreign

xx. No change 5%
colleges and universities.

On payment of interest on deposit to a life insurance company by

xxi. No change 5%
resident banks and financial institutions.

On payment for the purchase of weapons, bullets and communication No TDS

xxii. equipment for self-use by the Nepal Army, Nepal Police and Armed No change Proviso clause to
Police Force. section 89(3)

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 # Nature of Transaction FY 2022-23 FY 2021-22

On payment of interest on loans availed in foreign currency from foreign

banks or other foreign financial institutions by the reservoir or semi No TDS
xxiii. No change
reservoir-based hydropower projects producing above 200 MW of energy
and managing financial closure by mid-April 2026 (Chaitra end 2082).

On payment of royalty to resident person for literary article or 1.5%

xxiv. composition. No provision
[New provision]
Section 88 (1) (13)
7.2 Rates of advance taxes

# Nature of Transaction FY 2022-23 FY 2021-22

i. a) Gain on disposal of Interest in any resident entity (listed in the stock

exchange)
- To a resident natural person
No change 5%
a. Listed Shares held for more than 365 days
b. Listed Shares held for 365 days or less than 365 days No change 7.5%
- To resident entity No change 10%
- Others (including a non-resident person) No change 25%
b) Gain on disposal of Interests in any resident entity (unlisted)
- To a resident natural person 10%
No change 15%
- To resident entity
25%
- Others (including a non-resident person)

ii. On import of items under

- Custom Banding Category 1 (Live Animals),
- Custom Banding Category 3 (Live, Fresh and Iced Fishes)
- Custom Banding Category 6 (fresh flowers), No change 5%
- Custom Banding Category 7 (Fresh vegetables, potato, onions, dry
vegetables, garlic, baby corn),
- Custom Banding Category 8 (Fresh Fruits)

iii. On import of items under

- Custom Banding Category 2 (Meat),
- Custom Banding Category 4 (Dairy products, egg, honey),
- Custom Banding Category 10 (kodo, phappar, junelo rice and kanika) No change 2.5%
- Custom Banding Category 11 (Maida, aatta and pitho)
- Custom Banding Category 12 (medical herbs and sugarcane)
- Custom Banding Category 14 (plant produces)

iv. Banks and financial institutions providing foreign exchange facilities for
payment to foreign institutions for conducting language and Standardized No change 15%
examinations of the student going to study abroad.

v. If any person receives payment in foreign currency for providing software

and similar other electronic facilities outside Nepal, BFIs and Money No change 1%
Transfer shall deduct advance tax.

vi. If any resident natural person not involved in business operation receives
payment in foreign currency for providing software and similar other
electronic facilities outside Nepal, BFIs and Money Transfer shall deduct No change 1%
advance tax.

vii. If any resident natural person not involved in business operation receives
payment in foreign currency for consultancy service outside Nepal, BFIs No change 1%
and Money Transfer shall deduct advance tax.

viii. If any resident natural person not involved in business operation receives
payment in foreign currency for audio visual upload on social media, BFIs No change 1%
and Money Transfer shall deduct advance tax.

vix. Gain on Disposal of land or land & building:

- Owned by an individual for over 5 years 5% 2.5%
- Owned by an individual for up to 5 years 7.5% 5%

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 # Nature of Transaction FY 2022-23 FY 2021-22
- Owned by a person other than individual No change 1.5%
* The land or land and building or building disposed at proceeds less than Rs
1,000,000 do not fall under the category of non-business chargeable assets
(NBCA). These taxes are withheld by the Land Revenue office on the sale
amount.

*Windfall gain tax of 25% will be exempted for the reward up to Rs 500,000 received on behalf of contribution in the field of
literature, art, culture, sports, journalism, science and technology and general administration.

** In case of house rent other than payment to a natural person, additional municipality tax to be included and deposited with the
local ward/municipal office (2% in case of Kathmandu and Lalitpur Municipal Authorities).

7.3 Applicability of TDS

# Nature of transaction FY 2022-23 FY 2021-22

i. Payment for question setting, answer evaluation No change 15%

Payment made by a natural person relating to activities other than business

ii. No change No TDS
activities

iii. Payment for articles published in Newspaper No change No TDS

iv. Interest paid to the resident bank and other financial institutions No change No TDS

v. Interregional interchange fee paid to the credit card issuing bank No change No TDS
vi. Interest or fees paid by the GON under a bilateral agreement No change No TDS
vii. Tax exempt payment or TDS deductible u/s 87 No change No TDS
Incentive paid to the consumer for making payment against purchase of
viii. goods or services through electronic wallet such as e-money, Mobile No change No TDS
banking

Payment of interest on the loan between the cooperative bank and

ix. No change No TDS
cooperative institutions.

7.4 Final withholding payments

# Nature of transaction FY 2022-23 FY 2021-22

On dividend paid by the resident company and Partnership firm

i. - To Resident person No change 5% for both
- To Non- resident Person
10%
[in case of vehicle
rental]
Payment of freight for transportation of goods or vehicle rental payment No change
ii.
made to a resident natural person. 2.5%
[in case of freight
for transportation
of goods]

On payment of gain in investment insurance by resident natural No change

iii. 5%
Person
iv. On payment of gain from an unapproved retirement fund No change 5%
On payment of interest or similar type having source in Nepal to
natural person [not involved in any business activity] by Resident No change
v. 5%
Bank, financial institutions or debenture issuing entity, or listed
company
No change
vi. Windfall gains 25%*

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8. Fines and Penalties

Section Circumstance FY 2022-23 FY 2021-22

Rs 5,000 or
0.01% of the
Estimated Income Tax Return under Section 95(1) not filed by the assessable
117(1)(Ka) No change
taxpayer income
whichever is
higher
1.5% p.a. on
Advance Withholding Tax Return under Section 95Ka(5) not filed the amount of
117(1)(Kha) No change
by an advance tax withholding agent tax to be
withheld
Person under
Section 4(4):
Income Tax Return under Section 96(1) not filed Rs 100 p.m.
Others:
117(1)(Ga) If the ITR is filed within the period of extension the fine under No change
Higher of: Rs
Section 117(Ga) is not attracted, otherwise fine is attracted from the 100 p.m.; or
due date for filing the ITR irrespective of the extension obtained. 0.1% p.a. on
the amount of
inclusions
0.1% p.a. on
Financial Statement is not submitted within the prescribed
117(1)(Gha) No change the amount of
time by entities under Section 2(Dha) (Exempt Entity)
receipts

For the year

during which
the
documentation
is not
Fails to maintain proper documentation for an income year as maintained,
117(2) No change
required by Section 81 calculated as:
Higher of:
Rs 1000; or
0.1% of the
amount of
inclusions

2.5% p.a. on
Withholding Tax Return under Section 90(1) not filed by the tax the amount of
117(3) No change
withholding agent tax to be
withheld

15% p.a. on the

Installment tax to be deposited under Section 94 is not made
118(1)(Ka) No change outstanding
as prescribed
amount

Failure to Pay Tax on or before the date on which the tax is payable. 15% p.a. on the
119(1) Section 119(2): For the purposes of calculating interest payable under No change outstanding
Section 119(1), any extension granted under Section 98 is ignored. amount

An additional
In case tax has not been paid within the date allowed under Section 5% p.a. is
119(4) No change
110APayment of the outstanding tax in installments levied on the
arrears

Except as otherwise provided in this Act, a person who fails Rs 5,000 to

119Ka No change
to comply with this Act or the Rules framed hereunder Rs 25,000

Makes a false or misleading statement or omits from a statement

100% of the
made to the Department any matter or thing without which the
120(Ka) No change amount of tax
statement is false or misleading in a material particular, knowingly
short paid
or recklessly to the Department
Makes a false or misleading statement or omits from a
50% of the
statement made to the Department any matter or thing without
120(Kha) No change amount of tax
which the statement is false or misleading in a material
short paid
particular, but not knowingly or recklessly to the Department

A person who knowingly or recklessly aids or abets another person

100% of the
to commit an offense under Chapter 23 (Section 123 to Section
121 No change underpayment
130), or counsels or induces another person to commit such an
of tax
offense
Note: The rate in the above schedule is applied on the highest integer month basis i.e. part of a month is counted as a
month

Tax Rates for FY 2022-23 | P a g e | 15

9. Appeal to Revenue Tribunal
Taxpayers shall deposit the total undisputed tax amount and 50% of the disputed amount including fees and penalty as a
security deposit or arrange an equivalent bank guarantee for filing an appeal to the revenue tribunal. On the calculation of such
deposit or equivalent bank guarantee amount, 25% of the disputed amount deposited at the time of administrative review shall
also be included.

10. Other Taxes and Fees

10.1 Education service fees

▪ Collected from students going abroad for higher education at 2% of the foreign exchange facility availed from the BFIs.
▪ Interest shall be charged to the BFI at the rate of 15% per annum for the delay in deposit of education service fees. In case
the student is unable to go abroad for his/her studies due to any circumstances and the amount is refunded by the foreign
educational institution, then education service fees collected on such amount shall be refunded.

10.2 Infrastructure development tax

Collected for infrastructure development at customs point from petrol and diesel imported into Nepal at Rs 10 per liter.

10.3 Road construction charges

Collected on import or production of vehicles at the rates specified in Annex 3 of the Finance Bill 2079.

10.4 Road maintenance and improvement charges

Collected for maintenance and improvement of roads at Rs 4 and Rs 2 per liter of petrol and diesel imported into Nepal.

10.5 Film development fees

Collected by the cinema halls on the exhibition of foreign films at rates given in Annex 4 of the Finance Bill 2079.

10.6 Pollution control fees

Collected on the petrol and diesel sold within Nepal at Rs 1.50 per liter.

10.7 Telephone ownership fees

Collected from consumers for new connection or ownership transfer of fixed-line at Rs 500 per connection. Collection for mobile
phones will be at 2% of the value of the recharge card.

10.8 Telecommunication service charge

Collected from consumers of telephone, mobile and internet service by the telecommunication service providers at 10%
(Previous FY 2021-22: 13%). This charge is not applied to interconnection charges and up to 50% of the maintenance charges
of fixed broadband service charges.

10.9 Casino royalty

Collected from licensed casino operators per license at Rs 50 million (Previous FY 2021-22: Rs 40 million) per annum and
Rs 15 million (Previous FY 2021-22: Rs 10 million) per annum for gaming through modern machines and equipment only.

10.10 Digital service tax [New Provision introduced by Finance Bill 2079]
Collected on digital service provided by a non-resident to Nepalese customers at 2% on transaction value. However, such tax
shall not be applicable on annual transactions up to Rs 2 million.

Tax Rates for FY 2022-23 | P a g e | 16

 right solutions

right people
right size
right solutions

PKF T R Upadhya & Co

124, Lal Colony Marg, Lal Durbar Kathmandu, Nepal
Telephone: + 977 01440927, +977 014420026
Email: [email protected]
Website: pkf.trunco.com.np

Tax Rates for FY 2022-23 | P a g e | 17