Finance Act, 2083 - IRD Clarifications on Tax Relief, Concessions and Facilities

Seven key clarifications issued by the Inland Revenue Department addressing implementation ambiguities in Sections 44, 45, 46 and 49 of the Finance Act, 2083.

Prepared by: CA Roshan Poudel | With support of: Fadindra Acharya, Tax Officer, IRD

Background and Context

The Finance Act, 2083 introduced a range of tax amnesty and concession provisions under Sections 44, 45, 46 and 49. During implementation, certain ambiguities emerged regarding eligibility, scope and procedure for each provision.

The Ministry of Finance, in its decision dated 2083/05/12, directed the Inland Revenue Department (IRD) to issue formal clarifications. This public notice, dated 2083/05/22, addresses seven distinct issues raised by taxpayers and practitioners covering VAT, Income Tax and Excise Duty.

Relevant Provisions - Quick Reference

Seven Official Clarifications

Below are the seven clarifications issued by the IRD, each presented with the issue raised and the official ruling.

No. 1 TDS Payable Balances and Eligibility under Section 44

ISSUE

Section 44 provides relief on tax remaining unpaid as per the filed return. A question arose: where a taxpayer's return shows income tax payable but TDS (Tax Deducted at Source) has already been deducted by a payer and shown as a receivable offset, can the taxpayer still claim Section 44 relief on the net outstanding balance?

IRD RULING

Yes, eligible. TDS deducted at source is itself income tax. The income return and financial statements must clearly identify the TDS deducted as a liability of the deductor. Since the net tax payable per the filed return still constitutes outstanding income tax, the taxpayer can offset TDS already deducted against the remaining tax balance and avail the Section 44 facility on the net amount.

No. 2 Advance Tax under Section 95A (Income Tax Act, 2058) and Section 44

ISSUE

Whether unpaid advance tax installments under Section 95A of the Income Tax Act, 2058 qualify for the amnesty facility under Section 44 of the Finance Act, 2083.

IRD RULING

Yes, eligible. Advance tax under Section 95A is a component of income tax. Where a taxpayer has filed their return (fulfilling the Section 44 condition), any outstanding advance tax installments forming part of that return's outstanding tax are covered under Section 44.

No. 3 TDS Withheld but Not Remitted - Demand under Section 90 - Matter in Appeal

ISSUE

A taxpayer deducted TDS as per their income return but did not deposit it. The tax office raised a demand under Section 90 of the Income Tax Act, 2058. The taxpayer has appealed this demand before an administrative or judicial body. Can this taxpayer access the benefit under Section 46 of the Finance Act, 2083?

IRD RULING

Yes, both Section 45 and Section 46 apply:

• The TDS demand raised under Section 90(8) of the Income Tax Act is an income tax liability.

• If there is an outstanding balance against this demand, Section 45 applies.

• If the taxpayer has challenged the demand before the IRD (administrative review) or a judicial body, Section 46 also applies - provided the taxpayer withdraws the case and pays the assessed amount + 1% surcharge by Poush end, 2083.

No. 4 Advance Tax Collected but Not Remitted under Sections 90 and 95A - Matter in Appeal

ISSUE

Where advance tax was collected under Section 90 or Section 95A but not deposited, and the tax authority has issued a determination order demanding the amount, and the taxpayer is in administrative review or judicial appeal - can they access the Section 46 facility?

IRD RULING

Yes, same ruling as Clarification 3 applies:

• Amounts demanded under Section 90(8) (TDS determination) and Section 95A(15) (advance tax determination) are income tax liabilities.

• Section 45 applies to outstanding arrears on such determination orders.

• Section 46 applies if the taxpayer has gone to administrative review or judicial appeal - subject to case withdrawal and payment of assessed tax + 1% by Poush end, 2083.

No. 5 Assessments by the Revenue Investigation Department (Rajaswa Anusandhan Bibhag)

ISSUE

Sections 45 and 46 refer to assessments made by the "Inland Revenue Department or its offices." A question arose whether assessments made by the Revenue Investigation Department (under the VAT Act, 2052 and Excise Duty Act, 2058) also qualify, since those sections do not explicitly name the Revenue Investigation Department.

IRD RULING

Yes, fully covered under Sections 45 and 46. The Revenue Investigation Department exercises tax assessment authority under delegated power from the VAT Act, 2052 and the Excise Duty Act, 2058. Accordingly, assessments made by the Revenue Investigation Department carry the same standing as IRD assessments, and the facilities under Sections 45 and 46 of the Finance Act, 2083 apply to those assessments equally.

No. 6 Meaning of "Dissatisfied" in Section 46 - Initial vs. Final Assessment

ISSUE

Section 46 uses the phrase "not satisfied with the assessment." Ambiguity arose as to whether this covers only initial assessments (before a hearing opportunity is given) or also final assessments (after the hearing). In practical terms: if a taxpayer is already in administrative review or judicial appeal at the initial assessment stage, can they still use Section 46?

IRD RULING

Yes - any level of assessment qualifies. The phrase "dissatisfied with the assessment" covers both initial and final-stage assessments under VAT, Income Tax and Excise Duty. Whether the taxpayer is at the first assessment level or a later appellate level, they remain eligible to access Section 46 benefits - provided they withdraw the pending case and make the required payment by Poush end, 2083.

No. 7 Meaning of "Dissatisfied" in Section 49 - Initial vs. Final Assessment

ISSUE

Section 49 provides a similar facility for dues under annual Finance Acts. The same ambiguity arose: does "dissatisfied with the assessment" mean the taxpayer must have received a final assessment, or is an initial assessment under challenge also eligible?

IRD RULING

Yes - both scenarios are explicitly covered under Section 49(2):

• Where a fee, duty or tax has been assessed and arrears are outstanding; OR

• Where such assessment is under challenge before any court or judicial body.

In either case, the taxpayer may withdraw the case and pay the assessed amount + 1% surcharge by Mansir end, 2083 to obtain the waiver of penalties, interest, additional fees and fines.

Summary Reference Table

Practical Takeaways for Taxpayers and Practitioners

Source and Disclaimer

Source: Public Notice issued by the Inland Revenue Department (IRD), Government of Nepal, dated 2083/05/22 (Bhadra 22, 2083 BS), pursuant to the Ministry of Finance decision dated 2083/05/12. Original notice published in Finance Act, 2083: Information Booklet on Tax Exemptions, Concessions and Other Provisions (Pages 45-49), under the authority of Director General Dr. Bhishma Kumar Bhusal, Inland Revenue Department.

Note: This article is prepared for informational purposes for tax professionals and CA students. Practitioners are advised to refer to the original Nepali text of the Finance Act, 2083 and the IRD notice for authoritative guidance.

Finance Act, 2083 Reference Series | Prepared by CA Roshan Poudel | With support of Fadindra Acharya, Tax Officer, IRD