A practitioner's guide to the Government of Nepal's first phase business recovery package.

Published: September 9, 2026

Published in support of Rohit Shah

1. Background

On August 26, 2026, catastrophic flooding in the Bhotekoshi river basin devastated Rasuwa, Nuwakot, Dhading, and Gorkha districts. Eight hydropower plants (281 MW) were damaged, four under-construction projects (388 MW) affected, and the Rasuwagadi customs corridor was shut down. The Prime Minister's Disaster Relief Fund exceeded Rs 11 billion. The Cabinet approved a first phase business recovery package on September 3, 2026.

2. Customs Duty Waivers

Full exemption from customs duties on three categories of replacement imports:

  • Commercial vehicles: deregister the destroyed vehicle with the Department of Transport Management; import a replacement at any customs point, duty-free.

  • Plant, machinery, and equipment: exemption capped at the quantity destroyed; import quantities must not exceed documented losses.

  • Goods destroyed after customs clearance: duties already paid may be credited against duties on fresh imports of similar goods. This window closes February 26, 2027. No extension is expected.

3. Income Tax Relief

  • Filing deadline extended to November 11, 2026 (Kartik 25, 2083) for income tax, VAT, and excise returns due in September and October 2026. Applies only to taxpayers in affected areas.

  • One-time full write-off of destroyed assets: the entire undepreciated balance of completely destroyed assets may be expensed in FY 2083/84. Any resulting tax loss may be carried forward under Section 20 of the Income Tax Act, 2058.

  • Presumptive tax filers (D01): complete income tax exemption for FY 2082/83 for individuals directly affected by the floods.

4. VAT and Excise Relief

  • Filing deadline extended to November 11, 2026, same as income tax.

  • VAT on destroyed stock: simplified write-off process available; maintain a destruction register verified by an insurer or local authority.

5. Repair Expense Deduction: Section 16(2) Waiver

The normal 7% cap on repair and improvement expenses is lifted for FY 2083/84. All repair costs on partially damaged assets are fully deductible in the year incurred. Distinguish repairs (deductible) from new asset purchases (capitalizable).

6. CSR Recognition

Contributions to the Prime Minister's Disaster Relief Fund qualify as CSR expenditure for FY 2083/84, separate from the income tax deduction available under Section 12(1)(b) of the Income Tax Act, 2058. Retain receipts for both purposes.

7. Local Government Concessions

Local governments are directed to grant temporary concessions on property tax, business tax, building permit fees, and other local charges. Implementation varies by municipality; engage local authorities proactively.

8. Loan Restructuring and Concessional Credit

  • One-time restructuring: BFIs must offer rescheduling for all affected borrowers without adverse NRB asset reclassification.

  • Concessional rate for one year: interest capped at base rate + 0.5%, or existing contractual rate, whichever is lower.

  • Replacement loans: new financing for replacement assets at concessional rates; NRB to review LTV norms.

Parameter

Normal Terms

Relief Terms

Interest Rate

Base rate + 1.5% to 4.0%

Base rate + 0.5% or existing, whichever lower

Duration

N/A

One year from restructuring

Asset Classification

May downgrade

NRB directive to prevent reclassification

9. Insurance Claims

  • Advance payment of up to 50% of estimated claim on preliminary assessment; file preliminary claims immediately.

  • Expedited surveyor deployment required; reinsurers must also advance 50% to primary insurers.

  • The 50% advance is not the final settlement; continue compiling full documentation.

10. Eligibility

Businesses and individuals directly affected in Rasuwa, Nuwakot, Dhading, and Gorkha districts. Eligibility requires ward-level disaster certificates, insurance damage assessments, and district administration confirmations. Obtain these immediately as they are required for every relief component.

11. Key Deadlines

Date

Action

Sep to Oct 2026

Obtain disaster certificates; file insurance claims; approach bank for restructuring.

November 11, 2026

File all deferred income tax, VAT, and excise returns.

February 26, 2027

Last date for customs duty adjustment on goods destroyed after clearance.

FY 2083/84

Claim one-time asset write-offs, uncapped repair deductions, and CSR recognition.

12. Practitioner's Checklist

Immediate (September 2026)

  • Obtain ward-level disaster certificates for each affected client.

  • Inventory destroyed and damaged assets with book values and replacement cost estimates.

  • File preliminary insurance claims and request 50% advance.

  • Initiate loan restructuring discussions with the client's bank.

By November 11, 2026

  • File all deferred VAT, income tax, and excise returns.

  • Compute and document the one-time asset write-off.

  • Apply Section 16(2) waiver to repair costs on partially damaged assets.

  • Advise D01 filers on FY 2082/83 income tax exemption.

By February 2027

  • Compile original customs declarations for destroyed goods and initiate duty adjustment.

  • Prepare replacement import documentation; confirm quantities do not exceed losses.

Ongoing

  • Maintain a dedicated flood relief file per client with all certificates, assessments, filings, and bank letters for audit readiness.

Disclaimer

For general informational purposes only. Not professional tax, legal, or financial advice. Based on publicly available information as of September 9, 2026. Consult a qualified Chartered Accountant before acting on any information herein.