Taxation in Nepal – The Current Scenario

Historical background

Though “Taxation in Nepal and Applicable Rate” the idea of ​​imposing income tax in Nepal as mentioned in the budget statement of Bikram Samvat 2008, the Trade Profits and Remuneration Tax Ordinance was issued in Bikram Samvat 2016 and from that year onwards there was an arrangement to levy tax on real estate and foreign investment.

The Trade Profits and Remuneration Tax Act was issued in the year 2017 BS. After that, the Entertainment Tax Act, 2017, Aviation Tax Act, 2018, Real Estate Tax Act, 2019, and Foreign Investment Tax Act, 2019 were issued and arrangements were made for tax collection. After the issuance of the Income Tax Act, 2019, Income Tax Rules, 2020, the tax range was increased by levying tax on business profits and remuneration as well as real estate, investment, agriculture, and insurance agencies. The tax spectrum was enhanced by the tax levy on corporate profits and remuneration, and on the property, savings, agriculture, and insurance companies following issuance, 2019, Income Tax Rules for 2020.

Working system of Inland Revenue Department

This agency draws up revenue regulations, taxes, taxes, excise, and other tax policies and legislation. It has expanded the reach of taxation, implemented the procedures and programs required to maximize the involvement of taxpayers in voluntary fiscal matters, monitored and evaluated compliance with tax legislation, and implemented taxation legislation on the basis of tax risk.

In this respect, the management of internal revenue, the provision of IT services for taxpayers, permanent account numbers identifying all taxpayers, tax audits and quest through handling the self-tax appraisal scheme, direct taxpayers touch, and tax management by IT use. The strategy and services were operated by reducing tax enforcement costs and rising tax participation and putting the informal economy under the tax net. In the operating process of the agency and its branch offices, functional working processes have been implemented.

Institutional management

In moving tax revenues from internal revenue channels, the position of the department was critical. This agency collects about half of the Government of Nepal’s total income. The Department has 84 Organizational Level Offices (1 Big Taxpayer’s Office, 1 Central, 43 Inland, 39 Taxpayers) and about 1700 Services authorized for this purpose.

About Tax Slab rate

Tax Rates for Natural person Fiscal Year 2077/78 (2020/21) (Only for Employment Income)

Single	Married	Applicable Tax Rate
For Individual	For Couple	Tax rate
Where the taxable income up to Nrs. 400,000/-	Where the taxable income up to Nrs 450,000/-	One percent
Where the taxable income more than 400,000/- but less than Nrs. 500,000/-	Where the taxable income more than 450,000/- but less than Nrs. 550,000/-	For individual Nrs. 4000/ and at the rate of 10 percent on the taxable income of more than Nrs. 400000/- For couple Nrs. 4500/- and at the rate of 10 percent on the taxable income of more than Nrs.450000/-
Where the taxable income more than 500,000/- but less than Nrs. 700,000/-	Where the taxable income more than 550,000/- but less than Nrs. 750,000/-	For individual Nrs.14000/- and at the rate of 20 percent on the taxable income of more than Nrs.500,000/- For couple Nrs.14500/- and at the rate of 20 percent on the taxable income of more than Nrs.550,000/-
Where the taxable income more than 700,000/- but less than Nrs. two million.	Where the taxable income more than 750,000/- but less than Nrs. two million.	For individual Nrs. 50,000/- and at the rate of 30 percent on the taxable income of more than Nrs.700,000/- For couple Nrs.50,000/- and at the rate of 30 percent on the taxable income of more than Nrs.750,000/-
Where the taxable income more than Nrs. two million.	Where the taxable income more than Nrs. two million.	For individual Nrs. 440,000/- and at the rate of 36 percent on the taxable income of more than Nrs. two million. For couple Nrs. 425,000/- and at the rate of 36 percent on the taxable income of more than Nrs. two million.

Advance tax deduction

What is a tax deductible in advance?

The Income Tax Act allows for a deduction at a fixed rate for these taxes at the time of the invoice (TDS). It focuses on the pay philosophy you earn. This system is used to keep tax rebates and tax processing costs to a minimum for taxpayers.

What are the advance tax deductions?

Income Tax Act 2058, in paragraph 17, the payable premium tax advance for payable above Rs. 50000 will be excluded from wages and benefits (employment benefits), interest earned by Nepalese citizens, natural resources, debt, registration payments, fees on the operations, commission or sales premium, leave payment or some other return dividend, investment fees.

Who should pay the tax in advance?

If fees have to be withheld in advance, the payer must deduct the advance fee.

Who is responsible for paying the tax refund in advance and collecting it?

If the advance tax allowance is exempt, the person withholding the advance tax as well as the person withholding the advance tax shall both be liable to himself fairly and individually.

When to make advance tax deduction?

The deduction of advance taxes should be made when the costs are paid or written down.

Is it possible to reconcile the amount deducted in advance?

The amount of advance tax deduction other than the final tax deduction payment can be matched with the tax amount to be filed with the income statement.

Is it possible to reconcile the tax-deductible balance in advance where there is an exemption? Will it be reconciled in the past year or not?

An individual deducted in advance will argue that only the tax sum that has to be filed in the income year payable is reconciled. If the tax balance withheld in advance has been exempted from reconciling, it cannot in the preceding year be reconciled. For refund by further tax liability or the next year, the advance tax has been filed. It will correspond to the amount of tax to be paid.

Where and when to file advance tax deductible amount?

The payer must register the pre-tax deducted sum at that bank or office and the details of the corresponding revenue heading within 25 days of the end of the month of payment, and the information of the receipt of payment shall be filed.

Do you have to submit details while filing advance tax deduction?

The person who deducts advance tax should give the details of advance tax deduction to the concerned offices under the Inland Revenue Department. Such details and amounts may be submitted jointly or separately.

Apply information on the Internet for the pre-tax deduction? Where can e-TDS be found?

You may also upload advance tax deduction data from the Internet. The officer must first collect a password in order to do so. The office in question should be accredited if e-TDS is introduced.

Pay revenue online

It has been more than a year since the Inland Revenue Department developed an online revenue payment system. The taxpayer can use the electronic system to pay up to Rs 5 million per month.

By logging in through the taxpayer portal of the department’s integrated tax system, taxpayers can pay up to Rs 1 million at a time and a maximum of Rs 5 million per month. To pay taxes using this method, the taxpayer must first verify his or her information with the tax office and obtain a username and password to authenticate himself.

This is done by online registration using a Nepal Clearing House Limited Connect IPS, which is appointed by the Government of Nepal as a payment service provider. Revenue may be filed with the username and password and the link between bank accounts.

Process of Payment

To do so, visit the website of the Department of Inland Revenue first. A taxpayer portal is available. Then go to General and double-click inside the integrated tax system. And the taxpayer login menu will be displayed. Click the Proceed to Payment option after logging in with user credentials.

If you want to create a voucher code number by placing your voucher information, you must select which revenue type (income tax, value-added tax, one of the excise duties).

Choose the corresponding title of income, year of income, the subject for which the revenue is filed, and enter the number you wish to file.

You have the choice to choose whether or not it is TDS whether you have selected revenue tax. Type the amount of income to be filed and pick whether or not the amount to be filed is EC. If the sum is EC, so choose yes and no.

Then prepare the voucher information by clicking on the button to file the revenue title. Likewise, you may prepare your voucher details of other tracks in the same way if you want to file revenues in various headings simultaneously.

Continue The Process

Revenues will be filed by the printing of the slip request slip with the voucher code number prepared to be used at every branch of the bank where revenues are filed for this purpose. If the taxpayer wishes to personally pay the revenue through electronic means, the payment processor should be selected from the taxpayer using the Make Payment button, and the connection IPS is provided.

You should go to it and build your account if Connect IPS does not have a username and password. You must complete the bank account data and download the form with the information after building the account and adding it to your bank account.

The receiver must go to every branch of the bank to check the connection of the bank account. Then pick the Tax Submission bank account and click on the send button. The Nepal Clearing House gives the person responsible to check the payment a one-time available password to a mobile number and email address.

If your account has debited the sum, then the debit success page will appear and the debit success status will appear in your request slip when you typed the password number and press the confirm button. The taxpayer will then file a fee of 1 million per month and up to 5 million per month.

Tax Rates for Entity Fiscal Year 2077/78 (2020/21)

Income Status	Applicable Tax Rate (in %)
Normal Business Entity	25
Bank, financial institutions, an entity carrying on general insurance business or telecommunication and internet service, money transfer, capital market business, securities business, merchant banking business, commodity future market, securities, and commodities broker business, conducting transaction of cigarette, bidi, cigar, chewing tobacco, power tobacco and related product liquor, beer or petroleum works pursuant to Nepal Petroleum Act, 2040 (1983)	30
Tax rates for cooperatives registered as per Cooperative Act, 2074 and engaged in a business transaction other than tax exemption are as follows: Operated in the area of Municipality If being operated in the area of Sub Metropolitan City Functioning in the area of Metropolitan City	5 7 10
Taxable income of Schools/Colleges registered under trust (Guthis)	20
Income sent abroad by any non-resident person’s foreign permanent establishment situated in Nepal in any income year
Income of any non-resident person in respect of the income mentioned in section 70 in any income year, The non-Resident person providing water transport, air transport, or telecommunication service that does not so depart or transmit from Nepal as not to reach another foreign country	5 2

Tax Collection Recent Status

Topic	Financial Year	Till September	2077/78	Upto Aswin
Title	Collection up to September 2076/77	Goal	Progress	Progress %
Income Tax	25278662	25278662	26151513	103.45
Rent Tax	1088863	1088863	771414	70.85
Interest Tax	5620191	5795284	6440727	111.14
Total Income Tax	33715362	32162809	33363654	103.73
Value Added Tax	27208260	27300864	27344958	100.16
Excise Duty	18289271	22001936	18009553	81.85
Health Care Charges	759137	786179	1250214	159.02
Education Service Tax	227165	392598	55968	14.26
Total	80199194	82644387	80024347	96.83

Advance Tax to Normal taxpayer

Particulars Installment Amount

a. Up to Poush end 40% of estimated tax
b. Up to Chaitra end 70% of the estimated tax

c. By Ashad End 100% of estimated tax*

• The amount to be paid under each instalment is 90% of the amount of estimate or revised estimate payable as the instalment of tax for each instalment period for the year reduced by the amount of each instalment paid by the person for an income year.

Presumptive Taxation

Particulars FY 2020-21 FY 2019-20

• 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
• An oil tanker, Gas bullet, Tipper No change Rs 12,000
• Car, Jeep, Van, Micro Bus
• (1) 0 to 1300 cc No change Rs 4,000
• (2) 1301 to 2000 cc No change Rs 4,500
• (3) 2001 to 2900 cc No change Rs 5,000
• (4) 2901 to 4000 cc No change Rs 6,000
• (5) 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
• For natural persons (Small Tax Payer) having turnover from business not exceeding Rs 2 Million
• and taxable income not exceeding Rs 200,000 (Refer criteria below at Note # below)
• Metropolitan, Sub-Metropolitan No change Rs 7,500
• Urban Municipality No change Rs 4,000
• Rural Municipality No change Rs 2,500

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