1. Tax Rates for Natural Person
1.1 Income Tax Slabs (Resident Natural Person)
The following slab rates apply to the taxable income of a resident natural person. The tax amount column illustrates the tax computed on a taxable income of Rs 60 lakh, and is the same for both an individual and a couple at that income level.
S.N. | Taxable income slab | Tax rate | Tax on this slab (Rs) |
|---|---|---|---|
1 | Up to Rs 10 lakh | 1% | 10,000 |
2 | Above Rs 10 lakh up to Rs 15 lakh | 10% | 50,000 |
3 | Above Rs 15 lakh up to Rs 25 lakh | 20% | 2,00,000 |
4 | Above Rs 25 lakh up to Rs 40 lakh | 27% | 4,05,000 |
5 | Above Rs 40 lakh (any amount) | 29% (27% + 2%) | 5,80,000 |
Total tax payable on Rs 60 lakh taxable income | 12,45,000 | ||
Note: The 1% tax under S.N. 1 is a social security tax. It does not apply to a registered sole proprietorship firm, to pension income, or to a natural person contributing to a contribution-based social security fund (Schedule-1, Section 1(1) and (2)). The slabs apply equally to an individual and a couple filing status; the couple election affects the basic threshold applied within the Act.
1.2 Allowable Deductions and Rebates from Taxable Income
A resident natural person may reduce taxable income by the following amounts (subject to the stated ceilings):
S.N. | Deduction / rebate | Amount allowed |
|---|---|---|
1 | Contribution to an approved retirement fund | Lower of Rs 5,00,000 or one-third of assessable income or Actual |
2 | Remote area allowance (by area category): 'A' Rs 50,000; 'B' Rs 40,000; 'C' Rs 30,000; 'D' Rs 20,000; 'E' Rs 10,000 | As per category (Rs 10,000 to Rs 50,000) |
3 | Foreign allowance of staff at Nepal's diplomatic missions abroad | 75% of the foreign allowance is deductible |
4 | Pension income of a resident natural person | Additional 25% of the basic exemption limit |
5 | Resident natural person with disability | Additional 50% of the basic exemption limit |
6 | Investment insurance premium | Lower of annual premium or Rs 40,000 |
7 | Health insurance premium (resident insurer) | Lower of annual premium or Rs 20,000 |
8 | Insurance premium on own private building (resident insurer) | Lower of annual premium or Rs 10,000 |
9 | Tuition fee paid to a resident for own children's education | Lower of 25% of the amount paid or Rs 25,000 |
10 | Woman earning only remuneration income | 10% rebate on the tax payable |
11 | Approved medical treatment expense (tax credit) | Lower of 15% of the actual bill or Rs 1500, adjustable against tax |
1.3 Presumptive Tax (D-01 Filers)
Applies to a resident natural person whose business taxable income is up to Rs 3 lakh and whose annual business turnover does not exceed Rs 30 lakh (Section 4(4)).
Business location | Tax for FY 2083/84 (Rs) |
|---|---|
Metropolitan or Sub-metropolitan City | 7,500 |
Municipality | 4,000 |
Other areas (rural) | 2,500 |
1.4 Turnover Tax (D-02 Filers)
Applies to a resident natural person with only Nepal-source business income, taxable income up to Rs 10 lakh, and turnover above Rs 30 lakh up to Rs 1 crore, and who does not provide consultancy or specialist services such as those of doctors and engineers (Section 4(4क)).
Part (क): Turnover up to Rs 30 lakh
Business location | Tax for FY 2083/84 (Rs) |
|---|---|
Metropolitan or Sub-metropolitan City | 7,500 |
Municipality | 4,000 |
Other areas (rural) | 2,500 |
Part (ख): Turnover above Rs 30 lakh up to Rs 50 lakh
Type of business | Rate |
|---|---|
Dealers in gas, cigarette and similar goods with up to 3% commission or markup | 0.25% |
Businesses other than the above | 1% |
Service businesses | 2% |
Part (ग): Turnover above Rs 50 lakh up to Rs 1 crore
Type of business | Rate |
|---|---|
Dealers in gas, cigarette and similar goods with up to 3% commission or markup | 0.3% |
Businesses other than the above | 0.8% |
Service businesses | 2% |
Note: Turnover tax is paid in two instalments (Section 94(1क)): by the end of Poush on turnover up to Poush 20, and by the end of Ashadh on actual turnover up to Ashadh 20 plus the estimated turnover for the remainder of Ashadh, less the tax already paid by Poush end.
1.5 Non-Resident Natural Person
The taxable income of a non-resident natural person is taxed at a flat rate of 25%.
1.6 Capital Gains Tax (Resident Natural Person)
Nature of disposal | Rate |
|---|---|
Non-business taxable property (land and building) owned for 5 years or more | 7.5% |
Non-business taxable property (land and building) owned for less than 5 years | 10% |
Gain on interest in a SEBON-listed entity held for more than 365 days | 7.5% |
Gain on interest in a SEBON-listed entity held for 365 days or less | 10% |
1.7 Foreign-Currency Digital, Consultancy and Social-Media Income
Where a resident natural person not engaged in business receives foreign-currency payment for software or similar electronic services provided outside Nepal, for personal consultancy services provided outside Nepal, or for audio-visual content uploaded to social media, the bank, financial institution or money transfer agency deducts 5% at the time of payment (Section 95क(6ख), (6ग), (6घ)).
1.8 Annual Vehicle Tax on Rental Vehicles
Payable per vehicle by rental vehicle owners through the transport office at the time of registration or renewal.
Type of vehicle | Annual tax (Rs) |
|---|---|
Car, Jeep, Van, Micro bus: up to 1300 cc | 6,500 |
Car, Jeep, Van, Micro bus: above 1300 cc up to 2000 cc | 7,000 |
Car, Jeep, Van, Micro bus: above 2000 cc up to 2900 cc | 7,500 |
Car, Jeep, Van, Micro bus: above 2900 cc up to 4000 cc | 9,500 |
Car, Jeep, Van, Micro bus: above 4000 cc | 11,000 |
Mini truck, Mini bus, Water tanker | 9,500 |
Mini tipper | 11,000 |
Truck, Bus | 12,500 |
Dozer, Excavator, Loader, Roller, Crane and similar machinery | 17,500 |
Oil tanker, Gas bullet, Tipper | 17,500 |
Tractor | 3,500 |
Power tiller | 3,000 |
Auto rickshaw, Three wheeler, Tempo | 3,500 |
Electric vehicle: up to 50 kW | 4,000 |
Electric vehicle: above 50 kW up to 125 kW | 5,000 |
Electric vehicle: above 125 kW up to 200 kW | 7,500 |
Electric vehicle: above 200 kW | 9,500 |
Electric E-rickshaw | 3,500 |
Two-wheeler | 3,000 |
2. Tax Rates for Entities
The following rates apply to entities under Schedule-1, Section 2 of the Income Tax Act, 2058.
Section | Entity / nature of income | Tax rate |
|---|---|---|
Sch-1, Sec 2(1) | General business entity | 25% |
Sch-1, Sec 2(2) | Bank, financial institution, general insurance business, entities carrying out financial transactions, telecom and internet service, money transfer, capital market business, securities business, merchant banking, commodity future market, securities and commodity brokers, dealers in cigarette / bidi / cigar / chewing tobacco / khaini / gutkha / pan masala / liquor and beer, and entities carrying out petroleum work under the Nepal Petroleum Act, 2040 | 30% |
Sch-1, Sec 2(3) | Cooperative registered under the Cooperative Act, 2074 (on non-exempt transactions): Municipality 5%, Sub-metropolitan 7%, Metropolitan 10%. For savings and credit (banking) cooperatives: Municipality 10%, Sub-metropolitan 15%, Metropolitan 20% | 5% to 20% |
Sch-1, Sec 2(3ख) | School or college registered and operated under a public trust (Guthi), on taxable income | 20% |
Sch-1, Sec 2(6) | Income repatriated abroad by the Nepal-based foreign permanent establishment of a non-resident | 5% |
Sch-1, Sec 2(7) | Taxable income of a non-resident in respect of income under Section 70. For a non-resident providing water transport, air transport or telecom service that does not depart Nepal to reach another foreign country: 2% | 5% (2%) |
Note: For cooperatives, the applicable rate depends on the type of cooperative (general versus savings and credit) and the tier of local body in which it operates, as set out in the cell above.
3. Business Exemptions and Tax Rebates (Section 11)
Section 11 of the Income Tax Act, 2058 grants the following business exemptions and concessions. Unless stated otherwise, percentages are exemptions on the tax otherwise payable, and time periods run from the date of commencement of commercial production or transaction.
Section 11 provision | Coverage | Exemption / facility |
|---|---|---|
11(1) | Income earned by carrying on an agricultural business by any person other than registered as a firm, company, partnership or corporate body and on agricultural income other than that earned from an agricultural business in land as referred to in clauses (d) and (e) of Section 12 of the Act Relating to Land, 2021 (1964) | No tax |
11(1) proviso | Registered agriculture business, vegetable dehydration business, or cold store business | 50% exemption |
11(2) | Cooperatives (Cooperative Act, 2074) in agriculture and forest-based activities (silk, fruit, livestock, dairy, poultry, fishery, herbs, coffee, vegetable seed, beekeeping, honey, rubber, agroforestry, etc.), cold stores, dealers in agri seeds / feed / pesticide / fertiliser / agri tools, and cooperatives operating in rural municipality areas; also dividend distributed by them | No tax |
11(2क) | Annual interest up to Rs 25,000 from deposits in micro-finance institutions, rural development banks, postal savings banks and Section 11(2) cooperatives in rural municipality areas (interest above Rs 25,000 is taxable) | No tax (on first Rs 25,000) |
11(2ख) | Special industry, hotel, resort or IT industry operating fully throughout the year: resident natural person income taxed at 30% | One-third exemption |
11(2ख) | Same as above, for an entity's income | 20% exemption |
11(3)(क) | Special industry, hotel, resort or IT industry providing year-round direct employment: 100+ persons 90% of tax; 300+ persons 80%; 500+ persons 75%; 1,000+ persons 70%. Additional 10% exemption where 100+ are employed including at least 33% women, dalit or persons with disability | Tax payable reduced to 70% to 90%; +10% extra |
11(3)(ख) | Special industry by location for 10 years: very undeveloped area (tax reduced to 10%), undeveloped area (20%), less developed area (30%). Special industry in hilly districts of Karnali and Sudurpaschim Provinces employing 100+ persons: no tax for 15 years | Tax reduced to 10% / 20% / 30% for 10 years; or no tax for 15 years |
11(3)(ग) | Special industry and tourism industry (except casino) with investment over Rs 1 arba employing 500+ year-round: no tax for 5 years, then 50% for 3 years. Existing industry raising capacity by 25%+ to Rs 2 arba employing 300+: income from the capacity increase is tax-free for 5 years, then 50% for 3 years | No tax 5 yrs, then 50% for 3 yrs |
11(3क)(क) | Industry in a Special Economic Zone in Himali districts and Government-specified hilly districts | No tax 10 yrs, then 50% |
11(3क)(ख) | Industry in a Special Economic Zone in other areas | No tax 5 yrs, then 50% |
11(3क)(ग) | Dividend distributed by an industry in a Special Economic Zone | No tax 5 yrs, then 50% for 3 yrs |
11(3क)(घ) | Foreign technology / management service fee and royalty earned by a foreign investor of a Special Economic Zone industry | 50% exemption |
11(3ख) | Exploration and extraction of minerals, petroleum, natural gas and fuel, with commercial transaction started by Chaitra 2080 | No tax 7 yrs, then 50% for 3 yrs |
11(3ग) | Zoological, geological and biotech parks specified in the Nepal Gazette, and software development, data processing, cyber cafe and digital mapping industries within a technology park or IT park | 75% exemption |
11(3घ)(क) | Hydro, solar, wind and biomass electricity (generation, transmission or distribution) licensed to start by Chaitra 2084: no tax for 10 years, then 50% for 5 years. Reservoir and semi-reservoir projects above 40 MW with financial closure by Chaitra 2085, and tandem downstream projects: no tax for 15 years, then 50% for 6 years | No tax 10 yrs then 50% (5 yrs); or no tax 15 yrs then 50% (6 yrs) |
11(3ङ) | Export income (Nepal source): resident natural person taxed at 20% gets 25% exemption; resident natural person taxed at 30% gets 50% exemption; an entity gets 20% exemption; export of IT-based services (BPO, software programming, cloud computing, etc.) earning foreign currency up to FY 2084/85 gets 50% exemption | 25% / 50% / 20% / 50% exemption |
11(3च)(क) | Operation of tram or trolley bus (10 years) | 40% exemption |
11(3च)(ख) | Construction and operation of ropeway, cable car or sky bridge (10 years) | 40% exemption |
11(3च)(ग) | Construction and operation of road, bridge, tunnel way, tunnel, railway or airport (10 years) | 50% exemption |
11(3छ) | SEBON-listed manufacturing, tourism service and hydropower (generation, distribution, transmission) entities, and entities under Section 11(3ग) | 15% exemption |
11(3ज) | Fruit-based brandy, cider and wine industry (10 years): very undeveloped area 40%; undeveloped area 25% | 40% or 25% exemption |
11(3झ) | Royalty income received for export of intellectual property | 25% exemption |
11(3ञ) | Income from sale by transfer of intellectual property | 50% exemption |
11(3ट)(क) | Tourism industry or international airline established with investment over Rs 1 arba | No tax 5 yrs, then 50% for 3 yrs |
11(3ट)(ख) | Tourism industry or international airline established with investment over Rs 3 arba | No tax 10 yrs, then 50% for 5 yrs |
11(3ट)(ग) | Tourism industry or international airline established with investment over Rs 5 arba | No tax for 15 yrs |
11(3ठ) | Special industry, IT industry and tourism-related industry capitalising accumulated profit into shares for capacity expansion of the same industry | No tax on such dividend |
11(ड) | Private company with paid-up capital of Rs 50 crore or more converting into and operating as a public company (for 3 years from conversion). Not available to companies required to be incorporated as public under Section 12 of the Companies Act, 2063 | 10% exemption for 3 yrs |
11(3ढ) | Industry producing and processing domestic herbs, dairy business, and textile production, on income from sale of own production | 50% exemption |
11(3ण) | Health institutions operated by community organisations, on taxable income | 20% exemption |
11(3त) | Micro enterprise: no tax for 7 years from commencement; additional 3 years no tax if operated by a woman entrepreneur | No tax 7 yrs (+3 yrs for women) |
11(3थ) | Entity building and operating public infrastructure and transferring it to the Government (BOT), and electricity house construction, generation and transmission | 20% exemption |
11(3द) | Special industry established or relocated into an industrial zone or industrial village | 50% for 3 yrs, then 25% for 5 yrs |
11(3ध) | Domestically produced raw material or auxiliary raw material sold to a special industry | 20% exemption |
11(3न) | Department-specified startup using innovative knowledge, idea, skill, technology or method, with annual turnover up to Rs 10 crore (5 years) | No tax for 5 yrs |
11(3प) | Special industry in the Kathmandu Valley relocating and operating outside the Valley | No tax 3 yrs, then 50% for 2 yrs |
11(3फ) | Industry producing new goods using only already-used waste materials that directly affect the environment | 50% for first 3 yrs, then 25% for 2 yrs |
11(3ब) | Industry producing health vaccines, oxygen gas and sanitary pads | No tax 5 yrs, then 50% for 2 yrs |
11(3भ) | Electric vehicle manufacturing and assembly industry established by Ashadh 2082 (5 years) | 40% exemption |
11(3म) | Agricultural tools manufacturing industry established by Ashadh 2082 (5 years) | No tax for 5 yrs |
11(3य) | Green hydrogen production industry (5 years) | No tax for 5 yrs |
11(3र) | Manufacturing and assembly of charging machines for electric vehicles (5 years) | No tax for 5 yrs |
11(3ल) | Person constructing / establishing and operating an industrial zone or industrial village | No tax 10 yrs, then 50% for 5 yrs |
11(3व) | Cold store established outside metropolitan and sub-metropolitan areas (10 years) | No tax for 10 yrs |
General rules on claiming exemptions
Section 11(4): where a person carries on separate activities each eligible for a different exemption, income for each activity must be computed as though earned by a separate person.
Section 11(5): where more than one exemption could apply to the same income, the person may claim only one chosen exemption, in addition to the facility under Section 11(2ख).
Section 11क: where the Government and a person enter into an agreement to build and operate infrastructure, the tax facilities available under the Act in force at the time of the agreement may be enjoyed for the agreement period.
4. TDS (Withholding Tax) Rates
The following advance-tax deduction rates apply under Sections 87, 88, 88क and 89, together with advance-tax collection under Section 95क, for FY 2083/84.
4.1 TDS Rates
Section | Nature of payment | Rate |
|---|---|---|
87(1) | Employment income (remuneration) | Schedule-1, Sec 1 rates |
88(1) | Interest with a Nepal source | 15% |
88(1) | Natural resource payment, royalty, service fee, commission, sales bonus, retirement payment, etc. (Nepal source) | 15% |
88(1), 92(1)(ज) | Meeting allowance, occasional teaching, question-paper setting, or answer-sheet checking | 15% |
88(1)(1) | Government retirement payment or contribution-based retirement payment from an approved fund, after deducting the higher of Rs 5,00,000 or 50% of the payment | 5% |
88(1)(2) | Commission paid by a resident employment company to a non-resident | 5% |
88(1)(3) | Aircraft lease (rental) payment | 10% |
88(1)(4) | Service fee to a VAT-registered resident service provider, or to a resident entity dealing in VAT-exempt transactions | 1.5% |
88(1)(5) | Rent with a Nepal source paid by a resident person | 10% |
88(1)(5)(क) | Vehicle rental to a VAT-registered vehicle rental business | 1.5% |
88(1)(6) | Return distributed from a mutual fund: natural person 5%; other person 15% | 5% / 15% |
88(1)(7) | Use of satellite, bandwidth, optical fibre, telecom equipment or electricity transmission line, paid by a resident | 10% |
88(1)(8) | Freight service and vehicle rental for the purpose of freight: 2.5%; but to a VAT-registered, 1.5% | 2.5% / 1.5% |
88(1)(9) | Interest paid by a resident bank/FI to a foreign bank/FI in foreign currency for a loan in an NRB-specified investment area | 5% |
88(1)(9क) | Interest on a foreign-currency loan from a foreign FI to reservoir/semi-reservoir hydro projects above 200 MW with financial closure by Chaitra 2082 | 5% |
88(1)(11) | Registration, tuition and examination fees paid to a foreign school or university | 5% |
88(1)(12) | Interest paid by a resident bank/FI to a life insurance company on deposits | 5% |
88(1)(13) | Royalty for a literary article or composition paid to a resident | 1.5% |
88(1)(14) | Service fee or commission paid to a resident natural person insurance agent | 20% |
88(2)(क) | Dividend | 5% |
88(2)(ख) | Investment insurance benefit | 5% |
88(2)(ग) | Benefit from an unapproved retirement fund | 5% |
88(3) | Interest (Nepal source, not related to business) paid by a resident bank/FI/cooperative/other debenture issuer or a listed company to a natural person on deposit, debenture or government bond | 6% |
88क(1) | Windfall gain | 25% |
89(1) | Contract or agreement payment exceeding Rs 50,000 | 1.5% |
89(3)(क) | Contract or agreement payment to a non-resident | 5% |
89(3)(ख) | Premium to a non-resident insurer, or commission from reinsurance premium received from a non-resident insurer | 1.5% |
89(3)(ग) | Other payments to a non-resident | As directed by the Department |
95क(1) | Advance tax on profit and gain of a person trading in the commodity future market, collected by the market service entity | 10% |
95क(2)(क) | Gain on interest in a SEBON-listed entity: resident natural person, held over 365 days | 7.5% |
95क(2)(क) | Gain on interest in a SEBON-listed entity: resident natural person, held 365 days or less | 10% |
95क(2)(क) | Gain on interest in a SEBON-listed entity: resident entity | 10% |
95क(2)(क) | Gain on interest in a SEBON-listed entity: others | 25% |
95क(2)(ख) | Gain on interest in a non-SEBON-listed entity: resident natural person | 10% |
95क(2)(ख) | Gain on interest in a non-SEBON-listed entity: resident entity | 15% |
95क(2)(ख) | Gain on interest in a non-SEBON-listed entity: others | 25% |
95क(5)(क) | Capital gain on a natural person's land or private building owned for 5 years or more | 7.5% |
95क(5)(क1) | Non-business taxable property (land and building) disposed involuntarily through Government land acquisition | 2.5% |
95क(5)(ख) | Capital gain on a natural person's land or private building owned for less than 5 years | 10% |
95क(5क) | Natural person providing own land or private building free of charge to the Federal, Provincial or Local Government | No CGT |
95क(6) | Disposal value of land or building owned by a person other than those in Section 95क(5) | 1.5% |
95क(6क) | Foreign-currency exchange facility for language / standardized test fees for students going abroad, provided by a resident bank/FI | 15% |
95क(6ख) | Foreign-currency payment for software or similar electronic services provided outside Nepal by a non-business resident natural person | 5% |
95क(6ग) | Foreign-currency payment for personal consultancy services provided outside Nepal by a non-business resident natural person | 5% |
95क(6घ) | Foreign-currency payment for audio-visual content uploaded on social media by a non-business resident natural person | 5% |
95क(6ङ) | Payment by a resident e-commerce operator to a person selling goods or services on its platform | 1% |
95क(6च) | Payment by a resident ride-sharing operator to a natural person providing service on its platform | 1% |
4.2 Payments Where No TDS Is Deducted
Section | Payment |
|---|---|
88(1)(5)(ख) | House rent received by a natural person |
88(1)(10) | Incentive amount for electronic payment (payment card, e-money/wallet, mobile banking) on purchase of goods and services |
88(4)(क) | Other payments by a natural person not related to business operation |
88(4)(क1) | Payment for an article published in a newspaper or magazine |
88(4)(ख) | Interest paid to a resident bank or other resident financial institution |
88(4)(ख1) | Interest paid by a cooperative bank or cooperative union on mutual loan investment |
88(4)(ग) | Tax-exempt payments |
88(4)(घ) | Inter-regional interchange fee paid to a credit-card issuing bank |
Note: Under Section 88क(2), a national or international award up to Rs 5 lakh for contribution to literature, art, culture, sports, journalism, science, technology, agriculture or public administration is not subject to TDS; TDS of 25% applies only on the amount exceeding Rs 5 lakh.
4.3 Payments Treated as Final Withholding (Section 92)
The following payments are treated as final withholding, so no further tax return obligation arises on them:
Dividend paid by a resident company or partnership firm.
Rent for land or house (and attached fixtures and equipment) with a Nepal source, paid to a natural person not operating a business.
Investment insurance benefit paid by a resident person.
Benefit from an unapproved retirement fund paid by a resident person.
Interest under Section 88(3) paid by a bank, financial institution or debenture issuer, or by a listed company or cooperative, to a natural person (Nepal source, non-business) or to a tax exempt institution under Section 2(ध).
TDS payments to a non-resident under Sections 87, 88, 88क or 89.
All retirement payments from the Government, an approved fund or an unapproved fund (except regular pension).
Meeting allowance up to Rs 20,000 per meeting, occasional teaching, question-paper setting, or answer-sheet checking.
Windfall gain payment.
Return distributed from a mutual fund to a natural person.
Gain of a resident natural person or non-resident not wishing to file a return under Section 95क(2) and (5); foreign-currency payments under 95क(6ख), (6ग) and (6घ); and service payments under 95क(6ङ).
Service fee or commission paid by a resident natural person to an insurance agent.
Vehicle or freight rental / service payment to a natural person paying tax under Schedule-1, Section 1(13).
Figures are for general reference; please verify against the current IRD notice and the Finance Act before applying to a specific case.
