Income Tax Act

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Document Information:

Year: 2011
Country: Nepal
Language: English
Document Type: Domestic Law or Regulation
Topic: Taxation and Fiscal Issues

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Income Tax Act, 2058 (2002)
[Amended by Financial Act, 2068 (2011)] Date of Authentication and the Publication
2068.7.03(27 Oct.2011)

An Act Made to Implement Proposals Relating to Fina nce of the
Government of Nepal
Preamble : Whereas, it is expedient to levy some charges, taxe s, duties,
cesses and fees, continue or alter the existing one s and also to amend the
laws in force relating to revenue administration in order to implement the
proposals relating to finance of financial year 206 8/69 of the Government
of Nepal;
Now, therefore, be it enacted by the Constitution Assembly
pursuant to Sub-articles (1) of Article 83 of Inter im Constitution of
Nepal,2063 (2006).
1. Short title and commencement : (1) This Act may be called the
“Financial Act, 2068 (2011).”
(2) This Act shall come into force immediately.
26. Amendment to the Income Tax Act, 2058 (2002): Of the Income
Tax Act, 2058(2002):-
(1) Of Section 2:
(a) The following Clause (h) shall be substituted for
Clause (h):
“(h) “Income” means the income earned by any perso n
from employment, profession, investment or

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windfall gain and the total amount of that income
calculated under this Act.”
(b) The following Clause (h1) shall be inserted af ter
Clause (h):
“(h1) “Windfall gain” means lottery, gift, prize, baksis, award for wining (jitauri) and any other
types windfall gains.”
(c) The following Sub-clause (2) shall be substituted for Sub-
clause (2) of Clause (n) :
(2) The amount payable by the person withholding
advance tax or the person subject to tax
withholding under Section 90 or the amount
payable by the person making payment in
installment under section 94 or the amount of
advance tax payable by the person making payment
under section 95A or the amount payable after the
assessment of tax under Sections 99, 100 and 101,
(d)
The following Clause (p1) shall be inserted after C lause
(p):
“(p1) “turn-over” means a turn-over equivalent to t he total
amount to be included under Section 7, 8 or 9 for
purposes of computing the income of a business or
investment in any income year”.
(e) Of Clause (r): (1) The following Sub-clause (r) shall be substituted for Sub-clause (r) :

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(r) “Non-occupational taxable assets” means any
land, building and interest or security in any
entity except the following properties:
(1) Occupational assets, depreciable assets or stocks-in-trade,
(2) A private building owned by a natural person in the following situation,-
(a) Being under ownership for a continuous period of Ten years or
more, and
(b) Where that person has resided for a total period of Ten years or more
continuously or at several times.
Explanation : for the propose of this Sub-
clause “private building” means building
and area of land covered equal to the
building or one ropany land , among them
which is less.
(3) A benefit of any beneficiary held in the retirement fund”,
(4) A private building belonging to and disposed of by any natural person for a value
less than Tree million Rupees, or
(5) An asset disposed of by way of transfer in any manner other than the purchase and sale
within three generations.
(f)
The following Clause (s) shall be substituted for C lause (s):

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“(s) “Organization entitled to enjoy exemption”
means the following entity:
(1) Any of the following entities registered in the Department as an entity enjoying tax
exemption:
(a) A social, religious, educational or benevolent organization of public
nature established with non-profit
motive,
(b) An amateur sports organization so formed with a view to promoting
social or sports related facilities
that the organization or its member
does not derive profits,
(2) A political party registered in the Election Commission,
(3)
Village Development Committee,
Municipalit y or District Development
Committee,
Provided that, in cases where any
person has derived any benefit from the
property of that organization and the
monies obtained from that organization
except in making payment for the
property or the service rendered by any
person to that organization or in
discharging functions in consonance with
the objective of the organization entitled

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to exemption, tax exemption shall not be
granted to such organization.”
(g) The figures and letters “Sub-`clause (1), (2), (3) and
(4)” shall be substituted for the figures and lette rs
“Sub-`clause (1), (2) and (3)” contained in Sub-cla use
(5) of Clause (x).
(h) The following Sub-clauses (1) and (2) shall be Substituted for Sub-clauses (1) and (2) of Clause ( ad):
“(1) Payment for having acquired the right to extra ct
water, minerals or other living and non-living
resources from the earth, or
(2) Amounts calculated based on the quantity or value of living or non-living resources of the
natural resources and minerals extracted fully or
partly from the earth”.
(i)
The following Clause (af) shall be Substituted for Clause
(af):

“(af) “Rent” means all payments including a premium
received for the house rent as well as for the
lease of a tangible property.
Provided that, this term does not include
any payment made for natural resources”.
(j) The words “to use or provide scientific experie nce” shall
be
Substituted for words “to provide scientific experience
“contained in that Sub-Clause (3) of Clause (ak).
(3) To provide the right to use any motion picture film, video
tape, sound recording or similar other means and to render
industrial, occupational or scientific experience,

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(k) The following Clause (ab) shall be substituted for
Clause (ab):
“(ab) “Investment” means the act of holding one or more properties or investing such properties,
except with the followings:
(1) Holding any property used by the owner
thereof in personal use, or
(2) Employment or occupation. Provided that, holding non-
business taxable property shall be
deemed as investment.”
(l) Of Clause (ae): (1) The words ” in respect of any income year” contained in the first sentence of paragraph (b)
of Sub-clause (1) shall be deleted.
(2) The word “or” shall be inserted at the end of paragraph (b) of Sub-clause (3).
(3) The word “or” shall be inserted at the end of para (a) of Sub-clause (4).
(4) The following Sub-clause (4a) shall be inserted
after Sub-clause (4):
“(4a) Government of Nepal,”
(5) The word “or” shall be substituted for the word
“and” contained in the second sentence of Sub-
clause (6).

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(m) The words “exemption, premium under loan liability”
shall be substituted for the word “premium” contain ed
in the first sentence of paragraph (2) of Sub-claus e
(ai).
(n) The words “sold or” contained in Clause (aj) sh all be
deleted.
(
o) The following Clause (an1) shall be inserted aft er
Clause (an):

“(an1) “Electronic medium” means the computer, fax,
e-mail, internet, electronic cash machine,
fiscal printer and other approved medium as
specified the Department”.
(p) The figure and letters “Sub-clause (5)” shall b e
Substituted for the figure and letters “Sub-clause (4)”
contained in the second sentence of Clause (ao).
(q) The following Clause (at1) shall be inserted af ter
Clause (at):
“(at1) “adjusted taxable income” means taxable
income calculated without deducting any
amounts as referred to in Section 12 and
without deducting any amount under Sub-
section (2) of Section 14, Section 17 or 18,
while calculating the taxable income of any
person in any income year.”
(r) The words “Ten percent” shall be substituted fo r the
words “Fifteen percent” contained in Clause (aw) of
Section 2.

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(s) The words “related with the work” contained in Clause
(aab) shall be deleted, and the words “as referred to in
Clause (y)” shall be inserted the words “any entity ”
contained in that Clause.
(2) Of section 4: (a) The following Sub-section (l) shall be substitu ted for Sub-
section (1):
“(1) The amount of tax required to be paid by any p erson
referred to in Section 3 for any income year shall be
equal to the total amount of tax required to be pai d by
such person in capacity of anyone or more than one
person mentioned in Clauses (a), (b) and (c) of the
Section.”
(b) The words “or both Sections” shall be inserted after the
figure “Section 51 or 71” as contained in Sub-secti on (2).
(c) The following Clause (c) shall be Substituted f or Clause (c)
of Sub-section (3):
“(c) The employer has made a claim only for the adjustment of tax on medical expenses paid by
him/her and for Subtraction of retirement contribut ion
paid by the employer him/herself and not claimed fo r
Subtraction of expenses for donation as referred to in
Section 12.”
(d) Of Sub-section (4): (1) The following Clause (a1) shall be inserted aft er
Clause (a):

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“(a1) Having not claimed for adjustment of tax for
medical expenses under Section 51 and for
advance tax deduction under Section 93.”
(2) The following Clause (b) shall be substituted f or
Clause (b):
“(b) The income earned from the business and the
turnover of the business do not exceed One
Hundred Fifty Thousand Rupees and One
Million Five Hundred Thousand Rupees,
respectively.”
(e) The figures and letters “Section 87, 88 and 89” shall be
substituted for the figure and letters “Section 88” contained
in the fourth line of Sub-section (6).
(3) Of Section (5): (a) The words “or both Sections” shall be inserted after the
words contained in the third line of paragraph “Sec tion 12 or
63” contained in Section 5.
(b) The words “and” shall be deleted contained in e nd of Sub-
clause (b) of section (5).
(c)
The following Clause (d) shall be inserted after Cl ause
(c):
“(d) Windfall gain”
(4) The following Section 6 shall be Substituted f or Section 6.
6. Assessable income:
Subject to this Act, the following incomes
earned by any person for any business, employment, investment
or windfall gain” in any income year shall be consi dered
assessable income:

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(a) Income earned by any resident person from his/her
employment, business, investment or windfall gain i n
that income year irrespective of the place of his/h er
source of income, and
(b) Income earned in that income year by any non-re sident
person from employment, business, investment or
windfall gain having income source in Nepal.
Provided that, the assessable income shall not
include any income exempted from tax pursuant to se ction
11 or 64 or both Sections.
(5) The words “shall be income” shall be Substitut ed for the words
“shall be computed in the income” contained in Sub- section (1) of
Section 7.
(6) The words “shall be” shall be substituted for t he words “computed
as the income” contained in Sub-section (1) of Sect ion 9.
(7)
The following Sub-Clause (4) shall be inserted afte r Sub-Clause (3) of
Clause (3) in Section 10:
(4) Any kind of income earned by Security Board of
Nepal in consonance with its purpose.
(8)
The following Clause (i) shall be inserted after Cl ause (h) in Section 10:
(i) Any kind of income of Government of Nepal.
(9) Of Section 11:
(a) The following Sub-section (2) shall be Substitu ted Sub-
section (2):
“(2) No tax shall be levied on the income of a
cooperative organization and saving and credit coop erative
organization or institution based in rural communit ies, which

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has been registered and operated under the Cooperatives Act,
2048 (1991) and which carries on agricultural and f orest
based industries such as professional forest relate d
enterprises inclusive of sericulture and silk produ ction,
horticulture and fruits processing, animal husbandr y, dairy
industry, poultry farming, fishery, tea gardening a nd
processing, coffee farming and processing, herbicul ture and
herb processing, vegetable seeds farming, bee keepi ng,
honey production, rubber farming, leasehold forestr y, agro-
forestry etc., cold storage established for the sto rage of
vegetables, agro-seeds, animal feed, pesticides, fertilizers
and agricultural inputs (except those operated with
mechanical power). No tax shall also be levied on t he
dividends distributed by such organization or insti tution.”
Explanation : The term “provision for this section rural
community” means any area, other the municipal area and
the VDC adjoining such area.
(b) The words “from a special industry and informa tion technology
industries” shall be Substituted for the words “fro m a special
industry” contained in Sub-section (3) of Section 1 1 and
The
following Clause (a) and (b) shall be substituted f or
Clause (a) and (b) of same Sub-section:
(a)
If the special industry and information technology
industries give direct employment to Three Hundred or
more Nepalese citizens throughout the year, Ninety
percent, If the special industry gives direct empl oyment to
One Thousand and Two hundred or more Nepalese
citizens throughout the year, Eighty percent of th e rate of
tax on the income of that year and; if the special industry

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give direct employment to at least Thirty Three percent for
women, dalit or disable persons including One Hundred or
more Nepalese citizens throughout the year, Eighty
percent,
(b) If a special industry has been operated in remo te,
undeveloped and underdeveloped areas, respectively Fifty,
Seventy and Seventy-Five percent of the tax leviabl e on
income of the years for Ten income years including the
income year in which such an industry started opera ting.
(c) The following Sub-sections (3a), (3b), (3c), (3d), (3e), (3f),
(3g), (3h), (3i), and (3j) shall be inserted after Sub-section
(3):
“(3a) Exemption or concessions regarding income ta x
to industries established at specified economic zon e and tax
on dividend distributed by them shall be follows:-
(a) In case the industry is established at special economic zone situated at Himali
districts or at any hilly districts notified
by Government of Nepal, the industry
shall avail an income tax exemption for
Ten years from the commencement of the
business of the industry and Fifty percent
of income tax in the upcoming income
year.
(b) Except the zone contained in clause (a), Any industry established at any other
special economic zone shall avail tax
exemption for Five years from the
commencement of the business of the

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industry and half of the income tax to be
levied on it for the income years
thereafter.
(c) The above industries established at any special economic zone shall avail tax
exemption on dividend distributed for
Five years from the commencement of
the business. After expiry of the Five
years, for a maximum period of Three
years a tax concession of Fifty percent of
the tax rate applicable shall be available.

(d)
Tax concessions at Fifty percent is
provided on income generated as service
charge or royalty for technology transfer
or management services provided by a
foreign investor for the industries
established at any special economic zone.
(3b) Hundred percent of the income tax chargeable o n
the income of an industry established in remote are as shall
be exempted upto Ten years from the date of operati on of the
industry.
(3c) Twenty-Five percent of the income tax chargeab le
on the income of an information technology industry
established in the information technology park as s pecified
by the Government of Nepal by a notification in the Nepal
Gazette.”
(3d) In a case, the agency (body corporate) receivi ng
license for the production, transmission and distri bution of

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the electricity begins with commercial production of hydro-
power, production and transmission, production and
distribution or production, transmission or distrib ution, upto
Chaitra 2075 B.S., such as an agency (body corporate), sha ll
receive full income tax remission upto for first Se ven years;
and Fifty percent income tax remission for upto Thr ee years
thereafter. Such a facility shall also be provided to the solar
power, wind power and bio-power production.
Provided that,-
(a) In the case, the hydroelectricity project who started construction work within Bhadra 7,
2071 B.S. (23 August 2014 A.D.) and
commences its commercial production within
Chaitra 2075 B.S (2019 A.D.), the income tax
shall be exempted fully for Ten years and after
that Fifty percent income tax shall be exempted
upto next Five years.
(b) In the case of a license who has already start ed
commercial production at the time of
commencement of this Sub-section the
provision prevailing at the time of receiving of
the license shall be applicable.
(3e) If a manufacturing industry exports goods that it has
manufactured, tax rebate shall be granted by Twenty Five percent
on the rate of tax leviable on income earned theref rom.
(3f) If roads, bridges, airports, tunnel roads are built and
operated or if investment is made on tram, trolley buses, tax
rebate shall be granted by Twenty Five percent on t he rate of tax
leviable on income earned therefrom.

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(3g) Tax rebate shall be granted by Ten percent on the tax
leviable on the manufacturing, tourism service, hyd ropower
generation, distribution and distribution industrie s enlisted in the
stock exchange and the entities set forth in Sub-se ction (3c) of
Section 11.
(3h) Tax rebate by Forty percent shall be granted f or up to
Ten years after the date of commencement of transac tion to the
industries that are established in the least develo ped areas and
produce fruit based brandy, cider as well as wine.
(3i) A person shall be entitled to tax rebate by Tw enty
Five percent of the rate of income tax leviable on the royalty
income earned from the export of intellectual prope rty right.
(3j) A person shall be entitled to tax rebate by Fi fty
percent of the rate of income tax leviable on the r oyalty income
earned from the transfer of intellectual property r ight.
(d) The following Sub-section (4) shall be Substitu ted for Sub-
section (4):
“(4) In computing the income of a persons as
referred to in Clauses (a) and (b) of Sub-sections (1), (2),
and (3), Clause (b) of Sub-section (3), Sub-section s (3a),
(3b) and (3c), Sub-section (12) of Section 1 of Sch edule 1
and Sub-sections (3) of Section 2 of Schedule 1, sh all
compute the income as if that only income were deri ved by
other separate person.”
(e) The following Sub-section (5) shall be Substitu ted for
Sub-section (5):
“(5) A person, who is in a position to have more
than one exemption in respect of the same income pu rsuant

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to the above mentioned Sub-sections, shall enjoy only one
exemption chosen by him/her.”
(f) The following Sub-section (7) shall be inserted after Sub-
section (6):
“(7) Notwithstanding anything contained in Sub-
sections (3a) and (3b), those industries availing t ax
exemption or tax concession under the same Sub-sect ions
(3a) and (3b) shall not avail the facility in case the assets it
has acquired for the industry were already used by another
person for such industry or for any other business. ”
(10) The following Section 11A. and 11b shall be inserted after Section
11: ” 11A. Tax chargeable on the build and operate of
infrastructures : If any agreement is concluded between the
Government of Nepal and any person for building and
operating infrastructures, the person building and operating
such infrastructures shall be entitled to enjoy tax facilities
provided by this Act pertaining to tax prevailing a t the time
of conclusion of that agreement during the period o f such
agreement.
11B. Relaxation to the infrastructure development p rojects of
national importance : In the case of hydro-power,
international airport, underground ways, roadways, railways
and similar infrastructure development projects of national
importance and the production industry employing mo re than
Three Hundred workers and using more than Fifty per cent
domestic raw material (other than cigarette, alcoho lic
beverage and beers), no source of income shall be s ought on

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the investment if it is made upto last day of Chaitra 2075
B.S.”
(11) The following Sub-section (2) shall be Substit uted for Sub-section
(2) of Section 12:
“(2) Notwithstanding anything contained in Sub-sect ion (1),
the expenditure deductible in any income year under that Sub-
section shall not exceed One Hundred Thousand Rupee s or Five
percent of the adjusted taxable income that person in that year,
whichever is lesser.”
(12) The following Section 12A. shall be inserted after Section 12:
“12A. Expenseson heritage preservation and expenses for
development of sports : In case, any company incurs
expenses on preservation and development of ancient ,
religious or cultural heritage located in Nepal; in curs
expenses on construction of public infrastructure r equired
for the development of sports, upon taking prior ap proval of
the Department, for incurring the expenses of any i ncome
year, such a company claim for the deduction of One Million
Rupees or Ten percent of the assessable income, whi chever
is lower.”
(13) of Section 14: (a) The words “created for an act to generate incom e from the
occupation or investment” shall be inserted after t he words
“of such person” in Sub-section (1) and the provi sion in the
Clause (b) shall be deleted.
(b) Of Sub-section (2),- (a) The phrase “the total interest amount which a r esident
entity controlled by an organization entitled to ta x

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exemption can deduct under Sub-section (1) in any
income year shall not exceed the total of the following
amounts if the interest is paid to the controlling person
or associated person” shall be Substituted for the
phrase “the total interest amount which a resident
entity controlled by an organization entitled to ta x
exemption can deduct under that Sub-section in any
income year shall not exceed the total of the follo wing
amounts” contained at the end and The words “income
of adjusted taxable income” shall be substituted fo r
the words “of taxable income” contained in Clause
(b)”.
(14) The following Sub-section (6) shall be substit uted for Sub-section (6) of
Section 15:
“(6) If the stock-in-trade of business of any perso n cannot be
determined, that person may choose to the first in first out method or
average cost method to compute the cost of stock-in -trade.”
(15) The following Clause (a) shall be substituted for Sub-section (8) of
Section 15:
“(a) In computing as per the average cost method, t o compute on the
basis of all weightage average costs of all the sto ck-in-trade of
the same type in the business under the widely reco gnized
accounting principle”.
(16) Of Section 15,- Of explanation :
“(a) The following proviso shall be inserted in exp lanation (c):

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“Provided that, no amount in respect of repair and
maintenance and depreciation shall be included in t he
overhead costs of a factory.”
(b) The following proviso shall be inserted in expl anation (d):
“Provided that, no amount in respect of repair and
maintenance and depreciation shall be included in t he
variable overhead costs of a factory.”
(17) Of Section 16:
(a) The following Sub-section (2) shall be substitu ted for Sub-
section (2):
“(2) Notwithstanding anything contained in Sub-
section (1), in deducting the expenses allowable un der that
Sub-section, it shall not exceed Seven percent of t he
depreciation base amount of the group of property r emaining
at the end of that income year.
Provided that, this limitation shall not apply to t he
repair and maintenance costs incurred by a person p roviding
air transport service in overhauling an aircraft in accordance
with the standards fixed by the Civil Aviation Auth ority of
Nepal.”
(b) The following Sub-section (3) shall be substitu ted for Sub-
section (3):
“(3) Any excess expense or part thereof which is no t
deductible by virtue of the limit referred to in Su b-section
(2) may be added to the depreciation base amount of the
group of the concerned property at the beginning of the
forthcoming income year”.
(18) Of Section 17:

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(a) The following Sub-section (2) shall be Substituted for
Sub-section (2):
“(2) Notwithstanding anything contained in Sub-
section (1), in computing the limit of expenses ded uctible
under that Sub-section in any income year, it shall not
exceed Fifty percent of the adjusted taxable income earned
from all businesses operated by that person”.
(b) The words “at the beginning of the coming incom e year”
shall be inserted after the word “capitalization” c ontained in
the second line of Sub-section (3).
(19) Of Section 18: (a) The following Sub-section (2) shall be Substitu ted for Sub-
section (2):
“(2) Notwithstanding anything contained in Sub-
section (1), in computing the limit of expenses ded uctible
under that Sub-section in any income year, it shall not
exceed Fifty percent of the adjusted taxable income earned
from all businesses operated by that person”.
(b) The words “at the beginning of the coming incom e year”
shall be inserted after the word “any part” contain ed in the
second line of Sub-section (3).
(20) The words “shall” shall be Substituted for the word “may”
contained in Sub-section (1) of Section 19.
(21) Of Section 20: (a) The following Clause (b) shall be Substituted f or the Clause
(b) contained in Sub-section (1):
“(b) Loss suffered by that person from any busines s which was
not deducted in the last Seven income years.

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Provided that, in the case of the projects which
involve building and operation of public
infrastructures to be transferred to the Government of
Nepal, powerhouses construction, generation and
transmission of electricity and petroleum works
pursuant to the Nepal Petroleum Act, 2040 any loss
not deducted in the last Twelve income years.”
(b) The following Sub-section (2) shall be substitu ted for Sub-
section (2):
(2) For purposes of computing the income earned by any
person from any investment in any income year, such
person may deduct the loss suffered by that person from
any other investment and not deducted in that year and
such person may deduct the loss suffered by that pe rson
from such investment or other investment in last Se ven
years.
(c)
The following Sub-section (8) shall be substituted after
Sub-section (7):
“(8) Where any person has enjoyed a full or partial tax
exemption in relation to the income derived from a business
or investment in any income year, such person shall not be
entitled to carry forward the loss made in such inc ome year
to the Subsequent income years.”
(22) Explanation of Section 21. (a) The word “private expenses of the natural pers on” shall
be substituted for the words “expenses made for nat ural
person” contained in Sub-clause (1) of Clause (a).

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(b) The following Clause (c) shall be substituted for Clause
(c):
(c) “Cash payment” means a payment to deposit in ba nk account,
by a letter of credit, cheque, draft, money order, telegraphic
transfer, money transfer ( hundi) through a bank or financial
institution and payment except a transfer made by a ny other
means between banks or financial institutions.
(23) Of Section 24
(a) The words “in calculating the income earned by a person”
shall be substituted for the words “in the calculat ion of the
income earned by the person” contained in Sub-secti on (2);
and the following Sub-clause (2) shall be substitut ed for
Sub-clause (2):
“(2) The value of such liability can be ascertained
actually, and”
(b)
The following Sub-section (3) shall be substituted for Sub-section
(3):
“(3) Notwithstanding anything contained in Sub-
section (1), the Department may recognize the accou nting
specified by the Nepal Rastra Bank, Subject to the Nepal
Rastra Bank Act, 2058(2002) and the banking laws in force ,
in respect of banking business.”
(c)
The following Sub-section (4) shall be substituted for Sub-section
(4):
“(4) In calculating a person’s income earned from a
business or investment on the accrual basis, where the
person includes any payment to which the person is entitled
or deducts any payment that the person is obliged t o make

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and a difference in the payment received or made by the
person occurs as a result, inter alia, of a change in exchange
rate, the amount of difference shall be adjusted at the time
when payment is received or made.”
(24) The words “refund of amount” shall be substitu ted for the words
“reimbursement of amount” contained in the second l ine of Clause
(a) of Sub-section (1) of Section 25.
(25) The words “money or” contained in the second l ine of Clause (a) of
Sub-section (1) of Section 27 and the words “money and”
contained in the same Clause shall be deleted.
(26) The following Section 29 shall be substituted for Section 29:
“ 29. Indirect payments
: In cases where any person derives
benefits indirectly from payments made by the payer or a
person associated with him or specifies another per son to
receive payment, the Department may, by issuing a n otice in
writing, treat the person himself deriving such ben efit or
specifying such other person as the recipient of pa yment.”
(27) The following explanation shall be inserted fo r Section 31:
“Provided that, the payment amount received as a
compensation for the physical damage happened in pe rsonal
accident of a resident natural person shall not nee d to be included
in the income and the treatment cost incurred in th e damage from
such an accident shall not be claimed for adjustmen t into the tax as
referred to in Section 51.”
(28) The word “seller” contained in Sub-section (3 ) of Section 32 shall
be deleted.
(29) The following Sub-clause (2) shall be substitu ted for Sub-clause
(2) of Clause (a) of Sub-section (1) of Section 38:

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“(2) Any amount required to be included in the assessment of the
income of that person as a result of acquisition of that
property.”
(30) The word “payment” shall be substituted for th e words “amount
Subject to tax” contained in the proviso to Clause (c) of Sub-
section (1) of Section 39.
(31) Of Section 41: (a) The following Sub-clause (2) shall be substitut ed for Sub-
clause (2) of Clause (a):
“(2) In re-disposing that property, the net outgoin gs made
for that property until the disposal pursuant to th is
Section shall be deemed to be equal to the amount
receivable.”
(b) The following Sub-clause (2) shall be substitut ed for Sub-
clause (2) of Clause (b):
“(2) In re-disposing that liability, the net incomi ngs made
for that liability pursuant to Sub-clause (1) until the
disposal under this Section shall be deemed to be
equal to the outgoings.”
(32) The word “taxable” shall be substituted for th e words “Subject to
tax” contained in Sub-section (2) of Section 45.
(33) The word “not to give” shall be substituted fo r the words “not to
take” contained in Sub-section (4) of Section 45.
(34) The following Section 47A. shall be inserted a fter Section 47:
“ 47A. Special provision relating to disposal owing t o merger or
acquisition of business: (1) If entities of similar nature carrying
on banking and financial business or insurance busi ness are
merged to each other, provisions of Clauses (a), (b ), (d), (e), (f)

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and (g) of Sub-section (2) of Section 57 and Sub-section (3)
thereof shall not apply.
Provided that, if there is any loss that could no t be
deducted of any entity that ceased to exist upon me rger, such loss
has to be deducted in the coming Seven years on pro rata basis. If
the entity that so deducts loss by equal installmen ts is again
divided prior to the deduction of loss wholly, tax on the amount
deducted for the deducted loss has to be paid at th e rate of tax
prevailing in the financial year of merger or acqui sition.
(2) If the disposal of assets and liability is ma de upon
the merger of entities pursuant to Sub-section (1), the following
shall apply:
(a) In the case of disposal of trade-in-stock and business property:
(1) The amount equal to the net expenses incurred in that property immediately before
the disposal shall be deemed to have been
acquired by that person in consideration for
that disposal, and
(2) The amount equal to that set forth in Clause (1) shall be deemed to be cost incurred by
the person acquiring the property.
(b) In the case of disposal of depreciable prope rty:
(1) The amount equal to the remaining value of the diminishing system of the group pursuant
to Section 4 of Schedule-2 at the time of
disposal shall be deemed to have been

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acquired in consideration for that disposal,
and
(2) The amount equal to that set forth in Clause (1) shall be deemed to be the cost incurred
by the person acquiring the property.
(c) In the case of disposal of liability: (1) The amount equal to that amount whichever is lesser out of the market value of the
liability and the net income immediately
before the disposal shall be deemed to be the
cost incurred by that person in consideration
for disposal.
(2) The amount equal to that set forth in Clause (1) shall be deemed to be the cost incurred
by the person bearing liability in
consideration having borne that liability.
(d) In calculating the cost of merged assets and liability, the entity merging business or the entit y
merged shall calculate only the cost in
consideration for assets and liability existed at t he
time of operation of the merged business by the
merged entity (prior to merger or acquisition),
pursuant to Clauses (a), (b) and (c).
(3) Tax deduction shall be made on the payment by
giving Fifty percent rebate on the rate of tax dedu ction to be
applied on the retirement pension on the additional lump sum
payment (except the payment made through the retire ment fund
or the payment to be made as mentioned in the terms and
conditions of employees0 for the purposes of awardi ng group

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retirement to the employees serving in the entity disposed upon
merger or the entity following merger pursuant to S ub-section
(1).
(4) The shareholders existing in the entity dispose d
upon merger pursuant to Sub-section (1) dispose the ir shares by
sale within Two years after the merger, no capital gain tax shall
be charged on the profits made on the shares so dis posed.
(5) Tax shall not be levied on the dividends distri buted
by the entity that has been disposed upon being mer ged pursuant
to Sub-section (1) to the shareholders existing at the time of
merger within Two years after the date of merger.
(6) An entity that intends to be disposed upon bein g
merger pursuant to Sub-section (1) shall have to gi ve a letter of
intent to be merged to the Inland Revenue Departmen t no later
than the last month of Kartik of the year 2068.
(7) An entity that intends to be disposed upon bein g
merger pursuant to Sub-section (1) shall have to fu lfill no later
than the last month of Kartik of the year 2070.
(8)
The provisions of this Section shall not be deemed t o
be applicable to an entity that does not give a let ter of intent
within the period specified in Sub-section (6) and an entity that
has not completed the process of merger by the date set forth in
Sub-section (7).
(35) The following Sub-section (3) shall be inserte d after Sub-section
(2) of Section 50:
(3) Notwithstanding anything contained in Sub-sect ion (1)
and (2) the resident widow and widower who has to t ake care of a
dependent shall be consider as spouse.

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(36) Of Section 54:
(a) The following clause (a) and (b) shall be subst ituted for Sub-
clause (a) and (b) of Sub-clause (1):
(a) Tax shall be imposed on a shareholder of any company or a partner of partnership firm as per the
mode of final tax deduction if dividend is
distributed to them, and
(b) No tax shall be imposed if other entities make distribution.”
(b) The following Sub-section (3) shall be substitu ted for Sub-
section (3):
“(3) notwithstanding anything contained in Sub-
section (1), no tax shall be charged if dividend re ceived upon
deduction of tax under that Sub-section is distribu ted”.
(c) Sub-section (4) shall be deleted.
(37) Of Section 57,-
(a) The following Sub-section (1a) shall be insert ed after Sub-
section (1) of Section 57:
“(1a) For the purposes of computing the change of
Fifty percent or more than Fifty percent ownership of any
entity as referred to in Sub-section (1), only the following
ownership of that entity shall be included:
(a) The ownership held by a shareholder holding One percent or more of the total ownership of
that entity, and
(b) The ownership held by an associated person of the shareholder who holds more than one

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percent of the total ownership of that entity, out
of the shareholders who hold less than one
percent of the total ownership of that entity.”
(b) The word and figure and letters “Section 59 or 60” shall be
deleted contained in the Clause (c) of Sub-section (2).
(c) The words “pursuant to Sub-section (4) of Secti on 24” shall be
substituted for “pursuant to clause (b) of Sub-sect ion (4) of
Section 24” contained in the Clause (d) of Sub-sect ion (2).
(38) The following Sub-section (1) shall be substit uted for Sub-section
(1) of Section 58:
“(1) An arrangement made by any entity by maintain ing all
of the following conditions shall be treated as an arrangement made
for reducing dividend tax:
(a) Where that entity has reserved, current or expe cted
profits,
(b) Where any person who acquires an interest of th e
entity and the recipient of the interest or his ass ociated
person makes any payment to the present or previous
beneficiary of the entity or his associated person
irrespective of whether or not it is related to the
acquisition of interest and whether or not payment is
made at the time of acquisition of interest,
(c) Where the payment is fully or partly reflected in the
profits of that entity,
(d) Where that entity distributes dividends to the recipient
of interest and the dividends fully or partly cover the
profits.”
(39) Of section 59:

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(a) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) An amount that is up to five percent of a due
and recoverable loan held in the risk bearing fund by a
person carrying on banking business Subject to the standards
prescribed by the Nepal Rstara Bank shall be deducted as an
expense. Where the risk bearing fund is so maintain ed, and
the expenses debited to the profits as a bad debt, the same
shall not be written off; and where the amount in t hat fund is
capitalized or profits or dividends are distributed , the same
shall be included in the income of the year in whic h such
distribution is made.”
(b) Sub-section (2) and (3) shall be deleted
(40) Of Section 60: (a) The following Sub-clause (3) shall be inserted after Sub-
clause (2) of Clause (b) of Sub-section (2):
“(3) Sum total of the following amounts provided for risk
coverage fund:
(a) Fifty percent of the net premium credited to the
profit and loss statement during the year: and
(b) One Hundred Fifteen percent of the pending
unsettled pending claims outstanding at the end of
the year.
Provided that, these amounts that are
shown as expenses during the year as profit
shall be included in the income of subsequent
year.
(b) Sub-section (3) and (4) shall be deleted.

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(41) Of Section 61:
(a) The following Sub-clause (2) shall be substitut ed for Sub-
clause (2) of Clause (b) of Sub-section (2):
“(2) The premiums as referred to in Sub-clause (1) of
Clause (a) returned to the insured”.
(b) The words “shall not be considered as expenses” shall be
Substituted for the words “shall be included in the expenses”
contained in Sub-section (3).
(42) Of Section 63:
(a) The following proviso shall be inserted in Sub -section (1):
“Provided that, the Citizen Investment Fund
established under the Citizen Investment Fund Act, if it
intends to maintain a retirement fund, and the Empl oyee
Provident Fund established under the Employee Provi dent
Fund Act, 2019 (–), if it operates a retirement fu nd, shall not
be required to obtain permission for such fund.”
(b) The phrase ” may make a claim for deduction in calculating
his income” shall be Substituted for the phrase “ma y make a
claim to deduct from the income” contained in Sub-s ection
(2).
(43) The words “mentioned in Sub-section (1) of Sec tion 2 of Schedule-
1” shall be Substituted for the words “applicable t o companies”
contained in Sub-section (3) of Section 64.
(44) Of Section 65: (a) The words “or the retirement payments made by Government
of Nepal” shall be inserted after the words “from t he
interest” contained in the second line of Sub-secti on (1) of
Section 65.

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(b) The following proviso shall be inserted at the end of the
explanation:
“Provided that, the payment made from the non-
contributory fund of the beneficiary shall not be c onsidered
as benefit received as an interest from the unappro ved
retirement fund.”
(45) The word “employment” shall be Substituted for the words “such
acts” contained in the first line of Sub-clause (2) of Clause (i) of
Sub-section (6) of Section 67.
(46) The following Clause (b) shall be Substituted for Clause (b) of the
explanation contained in Section 71:
“(b) “Average rate of tax of Nepal” means the rate to be set by
multiplying with One Hundred the amount to be set b y
dividing the amount of tax payable by a person as r eferred to
in Clause (a) of Section 3 in any income year by th e taxable
income of that person in that year prior to the adj ustment of
any foreign tax in that year.”
(47) The following Sub-section (2) shall be substit uted for Sub-section 92) of
Section 72:
“(2) The Government of Nepal may, by a notificatio n in the
Nepal Gazette, establish large taxpayer offices or Inland Revenue
Offices or taxpayer service offices under the Depar tment and
prescribe their working areas, in order to render a ssistance to the
Department in fulfilling its responsibilities menti oned in Sub-
section (1). The offices of which working areas hav e been so
specified shall be deemed as organs of the Departme nt.”
(48) The following Sub-section (1) shall be substi tuted for Sub-section
(1) of Section 74:

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“(1) The taxpayer shall perform the duties as mentioned in this
Act.”
(49) The following Sub-section (3) shall be inserte d after Sub-section
(2) of Section 77:
“(3) The Department may prescribe to submit any
information or particular or document to be submitt ed by a person
to the Department through the electronic medium.”
(50) Of Section 78:
(a) The following Sub-section (1) shall be Substitu ted for
Sub-section (1):
(1) The Department shall issue an identity numbe r
called as permanent accounts number to any person f or
purposes of identifying that person, Subject to thi s Act.
Provided that, a body having obtained approval from
the Department may give such permanent accounts num ber
by fulfilling the procedures referred to in this Ac t. Taxpayer
receiving permanent accounts number shall not do, i n such
manner, the transaction of export and import up to the period
specified by the Department.
(51) Of Section 78: (a) The following Sub-section (3) shall be substit uted for Sub-
section (3):
(3) Department may specify the circumstances whe re
any person has to show or mention his/her permanent account
number.
(b) The following Sub-sections (4) and (5) shall be inserted after
Sub-section (3):

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“(4) Notwithstanding anything contained in Sub-
section (1), any person specified pursuant to Sub-s ection (3)
shall obtain the permanent accounts number prior to doing
transactions.
(5) Notwithstanding anything contained in Sub-secti on
(1), (2), (3) or 4, no one shall be released from t he liability
of tax by the reason that he has not obtained the p ermanent
accounts number.”
(52) Of Section 81: (a) The words “at least” contained in Sub-section (2) of
Section 81 shall be deleted.
(b)
The following Sub-section (4) shall be inserted
after Sub-section (3):

“(4) The Department may provide approval to
maintain documents through electronic medium which
are to be maintained pursuant to Sub-section (1).”
(53) The words “The Department may prescribe to pay the tax, to
be so paid, also through the electronic medium.” wo rds shall
be inserted after the word “to be so paid” of the S ub-section
(1) Of Section 85:
(54) Of Section 88: “(a) The word “service charge, commission or sale b onus and”
shall be Substituted for the words “in making payme nt
service charge and if that person is an approved re tirement
fund, any” contained in Sub-section (1), and the fo llowing
proviso shall be Substituted for the proviso to tha t Sub-
section:

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Provided that, tax shall be withheld at the following
rate from the following payment:
(1) In the case of the retirement payment made by the Government of Nepal or by the approved
retirement fund, at the Rate of Five percent
from the benefits calculated pursuant to Clause
(b) of Sub-section (1) of Section 65,
(2) In the case of the commission paid by a residen t
employer company to a non-resident person, at
the rate of Five percent,
(3) In the case of payment of amount for aircraft lease, at the rate of ten percent.
(4) In case of service provider resident person who
are registered in the Value Add Tax, on the
payment of service charge, at the rate of One
point Five (One and half) percent of the paid
amount.”
(5) In the case of the rent paid by a resident pers on
having source in Nepal, at the rate of Ten
percent,
(6) In the case of a person receiving profit and benefit from the trade under commodity by
future market, at the rate of Ten percent.
(b) Clause (g) of Sub-section (1) of Section 88 sha ll be deleted.
(c) The following Sub-section (2) shall be substitu ted for Sub-
section (2):

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“(2) A resident person shall, in making the following
payments having source in Nepal, withhold tax at th e
following rate:
(a) In making payment of dividends, Five percent of the payment amount,
(b) In making payment of investment insurance benefits, Five percent of the payment amount,
(c) In making payment of benefits from an unapproved retirement fund, Ten percent of the
amount of benefits”.
(d) The following Sub-section (3) shall be Substitu ted for
Sub-section (3):
“(3) Notwithstanding anything contained in Sub-
section (1), in making payment of interest or of an amount in
the form of interest as follows by a resident bank, financial
institution or any other entity issuing bonds or a company
registered under the laws in force to any individua l for
deposits, bonds, debentures and governmental bonds, tax
shall be withheld from the total amount of payment at the
rate of Five percent:
(a) Which has source in Nepal, and
(b) Which is not related with the operation of business.”
(e) Of Sub-section (4):
(1)
The following Clause (a) shall be Substituted for C lause (a) :
(a) Any other payment except a payment related to a n
operation of business by a natural person or a paym ent of

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rent made for the renting of the building, land and
materials or instrument fixed therewith.
(2) The following Clauses (a1) shall be inserted a fter Clause (a)
of Sub-section (4):
“(a1) Payment for an article published in a newspap er and
for preparing question papers and examining answer
books.”
(2) The following Clause (d), (e) and (f) shall be inserted after
Clause (c) of Sub-section (4):
“(d) The interregional interchange fee paid to a ba nk
issuing credit card.”
(e) Any interest or fee paid by the Government of Nepal to a
foreign government or a foreign organization pursua nt to
an agreement between Government of Nepal and foreig n
government or Government of Nepal and International
Organization.
(f) Payment of interest, Ten Thousand Rupees by S mall
Finance Institution basis on rural community, Rural
Development Bank, Postal Saving Bank and collected
deposit income in finance pursuant to Sub-section ( 2) of
Section 11 of this Act.”
(55) The following Section (88A) shall be inserted after Section (88):
“ 88A. Withholding tax in windfall income
: In a payment of
windfall income tax shall be levied at the rate of
Twenty Five percent.
Provided that, Government of Nepal may
provide exemption in the windfall income by
publishing a Notification in the Nepal Gazette on t he

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national or international awards received for
contributing in the sector of literature, art, culture,
sports, journalism, science, technology and public
administration.”
(56) of section 89.
(a) The following Sub-section (1) shall be substit uted for
Sub-section (1):
“(1) In making payment of a sum exceeding Fifty Thousand Rupees for payment of contraction or contr act
to a resident person it shall be withhold tax at th e rate of
one and half percent of the total amount of payment .”
(b) The following Clause (a), (b) and (c) shall be
substituted for Clause (a), (b), (c) and (d) of Sub –
section (3):
“(a) Aircraft maintenance and other contraction or
contract- Five percent.
(b) In making payment of premium to non-resident insurance company- one and half percent.
(c) Except as mentioned herein above, where the Department has given a notice to resident person in
writing, at the rate specified in that notice.”
(c) The following Clause (a) shall be substituted for
Clause (a) of Sub-section (4):
(a) Any other payment, except the rent for renting a
land or building or fixtures therewith, source in
Nepal which was made to any other natural person
except who is operating business.

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(d) The following Clause (b) shall be substituted for
Clause (b) of Sub-section (4):
(b) Payments enjoying tax exemption or payments liable to tax withholding pursuant to Section 87 or
88.
(e) The following explanation shall be inserted in the
Section 89:
” Explanation: For the purpose of this Section “contr action
or contract” means a contract or agreement conclude d to
supply goods or labour or construction, fixation or
establishment of tangible property or structure and any act
prescribed by the Department as a contraction or co ntract
as well as it shall included the payment made for a service
rendered in case such service is being included by the
contraction or contract in the course of constructi on or
taxation or establishment.”
(57) Of Section 90:
(a) The following Sub-section (1) shall be substitu ted for
Sub-section (1):
“(1) Each person who is obliged to withhold tax has
to Submit to the Department a statement in such mod e and
format as specified by the Department within Fiftee n days
after the expiration of each month.”
(b) The phrase “in the following conditions, the pe rson Subject
to tax withholding” shall be Substituted for the ph rase “In
cases where the person withholding tax does not wit hhold or
pay tax as follows, both the person Subject to tax
withholding” contained in Sub-section (5).

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(c) The following Sub-section (8) shall be inserted after Section (7):
“(8) In case a person does file details or pays tax
pursuant to Sub-section (1) or (2) or if the Depart ment is
convinced that there is a situation of Sub-section (5) in
relation to a person, it may issue an order to subm it the
amount is not submitted or less amount submitted an d
interest as referred to in Section 119. Provided th at, before
issuing such an order, a Fifteen days written notic e along
with reasons thereof, shall be issued for defense e nclosing
the evidence and proofs.”
(58) Of Sub-section (1) of Section 92: (a) The following Clause (c) shall be substituted f or Clause (c):
(c) Profit paid by a resident person for investment insurance,
(b) The following Clause (e) shall be substituted f or Clause (e):
“(e) Interest as follows paid by a bank, financial institution
or any other entity issuing bonds or a company
enlisted pursuant to the laws in force, as mentione d in
Sub-section (3) of Section 88:
(1) Which has source in Nepal and which is not related with the operation of business and paid
to an individual.
(2) Which is paid to an institution entitled to tax
exemption pursuant to Clause (d) of Section 2.”
(c) The following Clauses (g) (h) and (i) shall be inserted after
Clause (f):
“(g) Payment for meeting allowance and part-time teaching.”

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(h) Retirement payment made by the Government of
Nepal or approved retirement fund or un-approved
retirement fund including all types of retirement
payments.”
(i) Payment for windfall gain.
(59) The words “and advance tax” shall be inserted after the word
“installment” contained in chapter title of Chapter 18.
(60) Of Section 94:
(a) The following Sub-section (1) shall be substitu ted for
Sub-section (1):
“(1) A person who has or will have assessable
income in any income year from any business or inve stment
has to pay tax in Three installments as follows:
Date on w hich payment has to be made Amount to be paid
By the end of Poush (mid January) Amount of due and payable tax out of
Forty percent of the estimated tax
By the end of Chaitra (mid April) Amount of due and payable tax out of
Seventy percent of the estimated tax
By the end of Ashad (mid July) Amount of due and payable tax out of
Hundred percent of the estimated tax

Explanation
:
For the purposes of this Sub-section,-
(a) “Estimated tax” means the estimated tax in installment computed by any person liable to
pay tax in installment pursuant to Section 95 at
the time when the installment tax is to be paid
in any year.

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(b) “Due and payable tax” means the amount that
remains shortfall after Subtracting the following
total sum from the amount to be set by the
percentage prescribed for payment of estimated
tax in installments under this Sub-section:
(1) The amount of tax paid in that income year by a prior installment pursuant to
this Section before the date on which the
installment in question is to be paid,
(2) The amount of tax deducted from the payments to be included in computing the
income of any person in any income year
pursuant to Chapter-17 before the date on
which the installment in question is to be
paid in that year,
(3) In cases where the agent withholding tax or the person Subject to tax withholding
pays to the Department the amount of tax
deemed to be withheld from the payment
referred to in Clause (2) pursuant to Sub-
section (3) of Section 90 in that year
before the date on which the installment
is to be paid, such amount of tax, and
(4) The amount of tax adjustment for medical treatment expenses which that person
may claim pursuant to Section 51 in
respect of the accepted medical treatment
expenses incurred by that person before

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the date on which the installment is to be
paid.”
(b) The following words Sub-section (2) shall be Su bstituted for
the Sub-section (2).”
(2) Notwithstanding anything contained in sub-secti on (1),
in cases where the amount of installment to be paid pursuant to
that sub-section is less than Five Thousand Rupees, amount of
such installment need not to be paid.
(61) Of Section 95: (a) The words “by the Department” shall be inserted after the
words “may be prescribed” contained in Sub-section (1).
(b) The words “or where it is so specified pursuant to Sub-
section (6) that any person is not required to Subm it an
estimate to pay installment of tax” contained in Su b-section
(7) shall be deleted.
(62) The following Section 95A. shall be inserted a fter Section 95:
“95A. To collect advance tax: (1) An entity operati ng the commodity
future market service shall collect advance tax in the sum to be set by
Ten percent on the profits and income earned by a p erson trading under
the commodity future market from that business.
(2) If any person other than a resident entity do ing transaction
of purchase and sale of securities upon being regis tered pursuant to the
laws in force is benefitted from the disposal of in terest in any resident
entity, that person shall collect the advance tax a s follows on such
benefit to be calculated pursuant to Section 37:
(a) In the case of benefit from the disposal of int erest
of an entity enlisted in the Nepal Securities Board ,
the entity performing the functions of the stock

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exchange, Ten percent of amount of the benefit in
the case of resident natural persons and Fifteen
percent of the amount of benefit in the case of other
persons.
(b) In the case of benefit from the disposal of int erest
of an entity not enlisted in the Nepal Securities
Board, the entity of which benefit has been
disposed shall make deduction by Ten percent of
the amount of benefit in the case of resident natur al
persons and Fifteen percent of the amount of
benefit in the case of other persons.
(3) The Land Revenue Office shall collect the advan ce tax as
follows on the capital gain made for the disposal o f the land or personal
building of any natural person:
(a) At the rate of Five percent if the ownership of
disposed non-business taxable property (land and
building) is for Five years or more,
(b) At the rate of Ten percent if the ownership of disposed non-business taxable property (land and
building) is for less than Five years,
(4) Even though a person who is to collect advance tax
pursuant to Sub-sections (1), (2) and (3) has not c ollected the advance
tax, the tax shall be deemed to have been collected at the time when it
has to be recovered.
(5) A person who is to collect advance tax has to f urnish the
returns with the Department in such manner and form as specified by the
Department within Twenty Five days of the expiratio n of every month.

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(6) The amount of the advance tax collected or the amount
deemed to have been collected pursuant to Clause (a ) of Sub-section (3)
has to be furnished to the Department along with th e returns as referred
to in Sub-section (5) within the time limit as refe rred to in that Sub-
section.
(7) The person who is to furnish the advance tax an d the
person who is to collect advance tax shall be joint ly and severally
responsible for payment of the advance tax in the f ollowing
circumstance:
(a) In the event of failure of the person who is to
collect advance tax to collect the advance tax, and
(b) In the event of failure of the person who is to
collect advance tax fails to pay the amount deemed
to have been collected pursuant to Sub-section (4)
to the Department.
(8) A person who is to pay the advance tax pursuant to Sub-
sections (7) has to pay the tax within Twenty Five days after the
expiration of the time limit set forth in Sub-secti on (5).
(9) If a person who is to collect advance tax has p aid to the
advance tax not recovered to the Department pursuan t to Sub-section
(6), the person shall be entitled to recover the am ount equal to the
amount of tax so paid from the person who is to pay that tax.
(10) A person who is to pay the advance tax that ha s been paid
pursuant to this Section shall be entitled to deduc t the same from the
annual tax liability to be paid.”
(63) Of Sub-section (2) of Section 96:
(a) Sub-clauses (4) and (5) of Clause (a) shall be deleted.
(b) Sub-clause (1) of Clause (c) shall be deleted.

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(64) Of Section 97:
(a) The words “except where the Department issues a written
order or issues order by publishing a public notice ” shall be
Substituted for the words “except where the Departm ent
issues a written order” contained at the beginning.
(b) The word “or” contained at the end of Clause (b ) shall be
deleted.
(c) The words “natural person or” shall be Substitu ted for the
words “natural person” contained at the end of Clau se (c).
(d) The following Clause (d) shall be inserted afte r Clause (c):
“(d) If the motor vehicle owner making payment of t ax
pursuant to Sub-section (11) of Section 1 of Schedu le-
1 is an individual, such individual.”
(65) The following Sub-section (2) shall be Substit uted for Sub-section
(2) of Section 100:
“(2) Notwithstanding anything contained in Sub-sect ion (1), in
the circumstances mentioned in Sub-section (5) of S ection 96, the
Department may, base on the amounts mentioned in Su b-clauses (1), (2),
and (3) of Clause (a) of Sub-section (2) of Section 96, for any income
year or any part of that year, assess the tax of th at person in a justifiable
manner.”
(66) The word “Fifteen” shall be Substituted for th e word “Seven”
contained in the fourth line of Sub-section (6) of Section 101.
(67) The word “Department” shall be Substituted for the words “Tax
Department” contained in Section 106.
(68) The following Section 110A. shall be inserted after Section 110:

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“110A. Realization of tax by installment: Where any person
makes a written request for payment of his tax arre ars by
installment prior to institution of case pursuant t o Section
111, the Tax Officer may give permission to pay the same by
installment within a reasonable period of time as s pecified
by the Tax Officer.”
(69) The following Sub-section (3) shall be substit uted for Sub-section
(3) of Section 113:
“(3) If any person makes an application to the Depa rtment,
as prescribed, for the refund of the amount pursuan t to Sub-section
(1), such refund shall be made within Sixty days af ter the date on
which such application is made.”
(70) of Sub-section (1) of Section 114. (a) The following Clauses (a1) shall be inserted a fter Clause (a):
“(a1) The decision or order made pursuant to Sub-se ction
(8) of Section 90.
(b) The words “assessment of expenses incurred in an auction
sale as referred to in Sub-section (5) of Section 1 05” shall be
inserted after the words “assessment of tax” contai ned in
Clause (e) of Sub-section (1) of Section 114.
(71) of Section 115: (a) The word “total amount in case of undisputed ta x and One
Third in case of disputed tax” shall be Substituted for the
words “Fifty percent of tax to be paid” contained i n Sub-
section (6).
(b) The word “Sixty” shall be Substituted for the w ord “Ninety”
contained in Sub-section (8).

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(72) Of Section 117:
(a) The following Sub-section (1) shall be Substitu ted for Sub-
section (1):
“(1) If any person does not do the followings, such a
person shall be imposed fees as follows:-
(a) In case income details of any income year are not submitted pursuant to Sub-section (1) of
Section 95, at the rate of Two Thousand Rupees
for each detail.
(b) If any person withholding tax does not submit the
return referred to in Sub-section (5) of Section 95 A,
a fee in a sum to be set by one and a half percent
per year of the amount of tax to be withheld for
each month and portion of the month from the due
date for submission of the return until the date on
which such return is submitted shall be imposed on
such a person.
(c) In case income details of any income year are not submitted pursuant to Sub-section (1) of
Section 96, at the rate of One Hundred Rupees
per month, to a person as referred to in Sub-
section (4) of Section 4 of the Act and an
amount which is higher out of an amount,
calculated in a case of other person at the rate
of 0.1 percent per annual on the computable
amount without deducting any amount where
one may deduct such an amount in computing
the income in that income year and including
such an amount which is to be included on it or

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at the rate of One Hundred Rupees per month,
higher in those items.”
(b) The following Sub-section (2) shall be Substituted for Sub-
Section (2) :
(2) If any person does not maintain the documents
required to be maintained in any income year pursua nt to Section
81, a fee in a sum to be set by one and a half perc ent per year of
the assessable income drawn out without deducting a ny amount,
if any, that can be deducted and by including any a mount, if any,
that has to be included in computing the income of any income
year for each month and portion of the month or a s um set by one
Thousand Rupees per month , whichever is higher, shall be
imposed on such a person.
(73) The following Section 118 shall be Substituted for Section 118:
“118. Interest to be charged where the person maki ng payment
in installments makes lesser payment of estimated tax: (1)
In cases where, in the case of the amount of instal lment to be
paid by any person under Section 94 in any income y ear, the
amount mentioned in Clause (b) is more than the amo unt
mentioned in Clause (a), interest shall be charged on such
excess amount pursuant to Sub-section (2):
(a) Amount of each installment paid by that perso n
in any income year,
(b) Eighty percent of the estimated or revised estimated amount of total amount payable by
installments for each installment period in that
income year if such estimate or revised estimate
is correct and, if such estimated or revised
estimated amount is not correct, that of such
amount, of the total amount of tax to be paid by

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any person referred to in Clauses (a) and (b) of
Section 3, as is to be paid in installment for
each installment period in any income year.
(2) An interest to be set by the normal rate of in terest,
for each month and portion of the month, from the d ue date
for payment of the installment in that year to the following
period shall be imposed on the person referred to i n Sub-
section (1):
(a) In the case of a person in respect of whom tax is
to be assessed under Sub-section (1) of Section
99, until the date for Submission of the income
return,
(b) In the case of a person in respect of whom the Department has made revised tax assessment for
the first time under Section 101 because of
failure to make tax assessment under Sub-
section (1) of Section 99, until the date on
which a notice of that revised tax assessment is
delivered pursuant to Section 102.
Explanation
: For the purposes of this Section,
“amount payable by installment” means the
amount of installments calculated pursuant to
Sub-section (1) of Section 94 in the case of a
taxpayer who fails to Submit a revised estimate
once an estimate has been Submitted and in
respect of whom the Department has made
estimate pursuant to Sub-section (7) of Section
95 because of his failure to Submit an estimate
and calculated pursuant to Sub-section (5) of

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Section 95 in the case of a taxpayer Submits a
revised estimate and in respect of whom the
Department has made estimate pursuant to Sub-
section (7) of Section 95 because of being
unsatisfied with the Submitted estimate or
revised estimated.”
(74) The following Sub-section (3) shall be Substit uted for Sub-section
(3) Section 119:
(3) The person withholding tax pursuant to Sub-sect ion (8) of
Section 95A or the person shall not be allowed to r ecover the interest
payable by him/her from the person withholding adva nce tax pursuant to
Sub-section (4) of Section 90.
(75) The following Section 119A. shall be inserted after Section 119.:
“119A. Fees to be charged
: Except as otherwise provided in this
Act, a person who fails to observe any provision of this Act
or the Rules framed hereunder shall be liable to pa y fees
equivalent to the fine specified pursuant to Sectio n 128.”
(76) The words “in this Act” shall be Substituted for “Chapter-23”
contained in Section121:
(77) The following explanation shall be substituted for the explanation of
Section 124:
“ Explanation: For purposes of this Section, “any information or
statement submitted to the Department” means any st atement submitted
in writing to the Department or to the officer auth orized by the
Department in the course of performing the duties p ursuant to this Act
and includes the statement submitted as follows:

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(a) Application, notice, description, complaint, deposition, or
other document submitted, prepared, given or furnis hed
pursuant to this Act,
(b) Document submitted to the Department or any off icer of
the Department,
(c) Reply to any question asked by the Department o r any
officer to any person, or
(d) Information given by any person who has reasona ble
knowledge of the matter to be informed to the Depar tment
or any officer through any other person.”
(78) The following Section 136A. shall be inserted after Section 136:
“136A. Provision of awarded
: In case someone avoids or attempts
to avoid the tax liability as a whole or in part an d if someone
informs the same along with evidence such a person shall
may be awarded equal to Twenty percent of the amoun t of
the tax assessable from the evidence submitted by s uch a
person out of the tax amount recovered on the basis of such
information.
(79) Repeal
: Section 66, 89A and 89B shall be deleted.
(81) Amendment to Schedule-1:
(1) Of Section 1: (a) The following Sub-section (1), (2), (3), (4), ( 5), (6)
and (7) shall be substituted for Sub-section (1), (2),
(3), (4), (5), (6) and (7) :
“(1) Tax shall be levied at the following rate on
the taxable income of any resident natural person i n
any income year, subject to Sub-sections (2) and (4 ) of
this Schedule:-

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(a) For the taxable income not exceeding
One Hundred Sixty Thousand Rupees on
employment, at the rate of One percent
tax.
(b) Where the taxable income is more than One Hundred Sixty Thousand Rupees but
less than Two Hundred Sixty Thousand
Rupees, pursuant to Clause (a), One
Thousand Six Hundred Rupees for upto
One Hundred Sixty Thousand Rupees and
at the rate of Fifteen percent if the
taxable income is more than One
Hundred Sixty Thousand Rupees.
(c) Where the taxable income is more than Two Hundred Sixty Thousand Rupees,
pursuant to Clause (b), Sixteen Thousand
Rupees for upto Two Hundred Sixty
Thousand Rupees and at the rate of
Twenty Five percent if the taxable
income is more than Hundred Sixty
Thousand Rupees. and
(d) Where the taxable income is more than Twenty Five Hundred Thousand Rupees,
pursuant to Clause (c), additional Forty
percent tax shall be levied.
Provided that, in the case of
taxpayer of a sole registered firm
pursuant to Clause (a), One percent tax
shall not be levied.

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(2) Tax shall be levied by the following rates
on the taxable income of any spouse making a choice
pursuant to Section 50 in any income year, subject to
sub-sections (4) of this Schedule:-
(a) One percent tax shall be levied on the taxable income on employment not
exceeding Two Hundred Thousand
Rupees.
(b) Where the taxable income is more than Two Hundred Thousand Rupees but less
than Three Hundred Sixty Thousand
Rupees, pursuant to Clause (a), Two
Hundred Thousand Rupees for upto Two
Thousand Rupees and at the rate of
Fifteen percent if the taxable income is
more than Two Hundred Sixty Thousand
Rupees.
(c) Where the taxable income is more than Three Hundred Thousand Rupees,
pursuant to Clause (b), seventeen
Thousand Rupees for upto Three Hundred
Thousand Rupees and at the rate of
Twenty Five percent if the taxable
income is more than Three Hundred
Thousand Rupees.
(d) Where the taxable income is more than Twenty Five Hundred Thousand Rupees,
pursuant to Clause (c), additional Forty
percent tax shall be levied.

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Provided that, in the case of
taxpayer of a sole registered firm
pursuant to Clause (a), One percent tax
shall not be levied.
(3) The provision contained in sub-section (4)
of this Schedule shall apply in the following
circumstances:-
(a) In the case of a resident natural person, where the income is more than One
Hundred Sixty Thousand Rupees in any
income year or in the case of a resident
spouse who has not made a choice
pursuant to Section 50, where the income
is more than Two Hundred Thousand
Rupees in any income year, and
(b) Where the net profit derived from the disposal of non-business taxable property
is included in the computation of the
income and corresponding taxable
income of that natural person or spouse.
(4) Tax shall be levied by the following rate on
the following person, subject to sub-section (3) of this
Schedule:-
(a) Tax shall be levied by the rate referred to in sub-section (1) or (2) of this Schedule
on the amount whichever is higher out of
the following amounts, as if only it were
the taxable income of that natural person
or spouse:-

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(1) The amount remaining balance
after subtracting the amount of
profit from the total taxable
income of that natural person or
spouse, or
(2) One Hundred Sixty Thousand Rupees, in the case of a natural
person, or Two Hundred Thousand
Rupees, in the case of a spouse.
(b) Tax shall be levied by ten percent on the remaining amount of the taxable income.
Provided that,
(1) Tax shall be levied by Five percent on Disposal of non-business
taxable property (land and building
and land) on more than Five years
of ownership.
(2) Tax shall be levied by Ten percent on Disposal of non-business
taxable property (land and building
and land) on less than Five years of
ownership.
(5) For the individuals working in the remote
areas specified by the Government of Nepal, a
maximum sum of Fifty Thousand Rupees shall, for the
remote allowance, be deducted from the taxable
income, as prescribed, and the tax shall then be
calculated on the remaining amount only, in
accordance with this Section.”

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(6) For the employee working in the abroad
based diplomatic missions of the State of Nepal,
Seventy Five percent amount of their abroad
allowance shall be deducted from the taxable income ,
and the tax shall then be calculated on the remaini ng
amount only, in accordance with this Section.”
(7) The amount of tax pursuant to sub-section
(4) of Section 4 of this Act shall be as follows:-
(a) In the case of a natural person carrying on a business in the municipal corporation or sub-
municipal corporation area, Three Thousand
Five Hundred Rupees,
(b) In the case of a natural person carrying on a business in the municipal area, Two
Thousand Rupees,
(c) In the case of a natural person carrying on a business in any other place, One Thousand
Two Hundred Fifty Rupees.”
(b) The following Sub-section
(9), (10), (11),(12),(13),(14)
and (15) shall be inserted after Sub-section (8 ):
(9) Notwithstanding anything contained
elsewhere in this Section, in cases where any resid ent
natural person has a pension income, tax shall be
computed pursuant to this Section only on the amoun t
remaining balance after subtracting an additional
twenty-five percent of the amount mentioned in clau se
(a) of Sub-section (1) for the natural person or in
clause (a) of Sub-section (2) for the spouse from t he

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taxable income. But the threshold of such reducing
amount will not be more than as prescribed.
“(10) Notwithstanding anything contained
elsewhere in this Section, where any resident natur al
person is the disabled, additional Fifty percent of the
amount mentioned in Clause (a) of Sub-section (1) f or
such individual and in Clause (a) of Sub-section (2 )
for spouse shall be deducted from the taxable incom e,
and the tax shall then be calculated on the remaini ng
amount only, in accordance with this Section.”
(11) Notwithstanding anything contained
elsewhere in this Section, if resident natural pers on is
a woman whose taxable income mentioned in labour,
such person shall be exempt Ten percent from the
taxable amount.”
(12) Notwithstanding anything contained
elsewhere in this Section, where any resident
individual has procured an insurance business, the
amount to be set by investment insurance or Twenty
Thousand Rupees, whichever is lesser, out of the
premium paid for the same, shall be deducted from t he
taxable income, and the tax shall then be calculate d on
the remaining amount only, in accordance with this
Section.
(13) Notwithstanding anything contained
elsewhere in this Section, the owners of vehicles o n
hire shall pay annual tax at the following rates. I f the
owner of vehicle is an individual, the tax so paid shall
be final and binding.

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Category of vehicles Annual tax payable
per vehicle
(a) Mini-bus, mini-truck, truck and bus Rs. 1,500/-
(b) Car, jeep, van and microbus Rs.1,200/-
(c) Three wheeler, auto-rickshaw, tempo Rs. 850/-
(d) Tractor and power tiller Rs. 750/- (14) Notwithstanding anything contained
elsewhere in this Section, if an individual is full y
engaged in the operation of a special industry
mentioned in Section 11 of this Act throughout any
year, in calculating tax pursuant to this Section, tax
shall be charged by Twenty percent of the taxable
income, instead of Twenty Five percent thereof.
(15) Tax shall be charged at the rate of Fifteen
percent on the taxable income, instead of Twenty Fi ve
percent if it is earned by a natural person from
exports in any income year.”
(2) of Section (2):
(a) The words “cigarette, Bidi, cigar, chewing tobacco, Khaini,
liquors, beer” shall be inserted after the words “i n any
income year” contained in Sub-section (2).
(b) The following Clause (b) shall be substituted for Clause (b)
of Sub-section (3):
“(b) In cases where the entity,
(1) Builds and operates any road, bridge, tunnel, ropeway or sky-bridge, or

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60
Explanation : Ropeway includes cablekar
constructed for the purpose for carrying goods
or movement of the people .
(2) Operates any trolley bus or tram, or”
(3) Any co-operative so transacting except the
co-operatives which is registered pursuant to
Co-operatives Act, 2048 and enjoying tax
exemption in its transaction.
(c) The following Sub-section (3a) shall be insert ed after
Sub-section (3):
“(3a) Tax shall be levied by twenty percent on the
taxable income earned by any entity, through its so urce in
Nepal, from exports in any income year.”
(d) The following Sub-section (5) shall be substitu ted for
Sub-section (5):
“(5) Tax shall be levied, pursuant to Sub-sections (1)
and (4) of Section 1 of this Schedule, on the taxab le income
of a trust acquiring or looking after the property belonging to
any deceased resident person or of a disabled resid ent
individual in any income year as if the one who acq uires or
looks after or that trust money or trust resident w ere an
individual.”
(e) The word “Five” shall be Substituted for “Ten” of Sub-
section (3):
(f) The following Sub-section (7) shall be substit uted for
Sub-section (7):

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“(7) Tax shall be levied by Five percent on the taxable
income of any non-resident person in relation to th e income
referred to in Section 70 in any income year.
Provided that, in the case of a non-resident person
providing telecommunication, air transport or water transport
service, which does not so depart from the State of Nepal
that it has destination in a foreign country, tax s hall be
levied by two percent.”
(2) Of Schedule-2: (a) The words “Sub-section (5)” shall be substitut ed for “Section
(5) contained in Clause (b) of Sub-section (3) of S ection (2) :
(b) The following Sub-section (3) and (4) shall be inserted after
Sub-section (3):
(3) The production oriented industries which have capitalized capital amount from its property to
generate power ( urjashakti) required for such industry
shall be entitled to claim the Fifty percent deprec iation
in same year.
(4) If a person issues receipts (bills) installing fiscal
printer and cash machine, he/she may claim the tota l
amount invested on such machines as depreciation in
the same year.

ICNL

ICNL

Income Tax Act

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