Overview of Nepal’s Tax Structure
Nepal’s tax system is administered by the Inland Revenue Department (IRD) under the Income Tax Act, 2058. The system comprises:
✔ Direct Taxes (Income tax, property tax)
✔ Indirect Taxes (VAT, excise duty, customs)
✔ Local Taxes (Municipal service charges)
Income Tax System
1. Individual Income Tax Slabs (FY 2080/81)
| Taxable Income (NPR) | Rate | Surcharge |
|---|---|---|
| Up to 500,000 | 1% | – |
| 500,001 – 700,000 | 10% | – |
| 700,001 – 1,000,000 | 20% | – |
| 1,000,001 – 2,000,000 | 30% | – |
| Above 2,000,000 | 36% | 10% of tax |
2. Corporate Tax Rates
| Entity Type | Standard Rate | Concessional Rate |
|---|---|---|
| Private Companies | 25% | 20% (manufacturing) |
| Banks/Financial Inst. | 30% | – |
| NGOs (Taxable Income) | 25% | – |
Tax Registration Process
Mandatory Registrations
| Tax Type | Threshold | Registration Authority |
|---|---|---|
| PAN | All taxpayers | IRD Office |
| VAT | NPR 2M turnover | Provincial Tax Office |
| Excise Duty | Product-specific | Customs Department |
Tax Filing Procedures
1. Income Tax Filing
- Deadline: Ashad end (Mid-July)
- Methods:
- Online via IRD Portal (https://ird.gov.np)
- Offline at Tax Service Office
2. VAT Filing
- Frequency: Monthly (by 25th of next month)
- Requirements:
- Sales/purchase details
- Tax invoices
3. Withholding Tax Compliance
| Payment Type | Rate | Filing Deadline |
|---|---|---|
| Salary | 1-36% | Monthly |
| Contract Payment | 1.5% | 15th of next month |
| Rent | 10% | Quarterly |
Key Deductions & Allowances
For Individuals
✔ Retirement fund contribution (up to NPR 300,000)
✔ Health insurance premium (up to NPR 25,000)
✔ Home loan interest (up to NPR 200,000)
For Businesses
✔ Depreciation (as per IRD rates)
✔ Research & Development (150% deduction)
✔ Employee training costs
Digital Tax Services
e-Filing Facilities
✔ IRDS (Integrated Revenue System)
✔ TSC Online for large taxpayers
✔ Mobile App for payments
Electronic Payment Options
- ConnectIPS
- eSewa/Khalti
- Bank transfers
Penalties for Non-Compliance
| Violation | Penalty |
|---|---|
| Late filing | 2% monthly interest |
| Underreporting | 100% of evaded tax |
| Non-registration | NPR 50,000 fine |
| Fake documents | Criminal charges |
Recent Reforms (2024 Updates)
✔ Increased threshold for mandatory audit (NPR 10M → 20M)
✔ Digital transaction incentives (15% tax discount)
✔ E-invoicing mandatory for VAT-registered businesses
✔ Single taxpayer ID system implementation
FAQs About Nepal’s Tax System
1. When is fiscal year in Nepal?
→ Shrawan 1 – Ashad 31 (Mid-July to Mid-July)
2. Can foreigners file taxes online?
→ Yes, with registered PAN
3. How to claim tax refunds?
→ File application with supporting documents
4. Is rental income taxable?
→ Yes, after 25% standard deduction
5. What’s the penalty for late VAT filing?
→ NPR 1,000/day (max NPR 25,000)
Pro Tips for Taxpayers
✔ Maintain digital records for 6+ years
✔ Use authorized tax software
✔ File before deadline to avoid penalties
✔ Consult tax professionals for complex cases
Need Assistance? Contact:
- IRD Helpdesk: ☎ 1660-01-51111
- Tax Consultants Association: ☎ 01-4260521
💡 Stay compliant and maximize deductions with proper tax planning! 💰
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