Annual Income Tax Rate in Nepal 2082/83 (2025-26)

Corporate tax rates in Nepal FY 2082/83:

• Normal businesses: 25%
• Banks, Financial Institutions, Insurance, Telecom: 30%
• Capital Market, Securities, Money Transfer: 30%
• Petroleum, Tobacco, Alcohol businesses: 30%
• Special Industries (Manufacturing, Export, IT): 20%
• Hotels, Resorts, IT Industries: 20% (newly added as special industries)

Additional rebates available based on employment generation (10-30%), location (70-90% for undeveloped areas), and investment amount.

Key new provisions in Finance Bill 2082:

• Green Tax: NPR 0.50 per kg/liter on coal, petroleum, petroleum coke
• Green Hydrogen Industries: 100% tax exemption for 5 years
• EV Charging Machine Manufacturing: 100% exemption for 5 years
• Industrial Zones: 100% exemption for 10 years, 50% for next 5 years
• Startups (up to NPR 10 crore): 100% exemption for 5 years (increased from NPR 1 crore)
• IT Export Income: 75% exemption (increased from 50%)
• Removal of advance tax on imports of live animals, meat, dairy, fruits, flowers

Available deductions for individuals:

• Retirement Fund Contribution: Lower of 1/3 of income, actual contribution, or NPR 5,00,000
• Life Insurance Premium: Up to NPR 40,000
• Medical Insurance Premium: Up to NPR 20,000
• Building Insurance Premium: Up to NPR 5,000
• Remote Area Allowance: NPR 10,000-50,000 based on area category
• Incapacitated Person: 50% of first slab (NPR 2,50,000)
• Pension Income: 25% of first slab or actual pension
• Foreign Allowance: 75% deduction for diplomatic mission employees

Capital gains tax on share disposal:

• Listed shares (held >365 days): 5% for natural persons, 10% for entities
• Listed shares (held ≤365 days): 7.5% for natural persons, 10% for entities
• Unlisted shares: 10% for natural persons, 15% for entities
• Non-residents: 25% on all share transactions

Tax is collected at source by the stock exchange during settlement. Different rates apply to encourage long-term investment over short-term trading.

TDS rates on consultancy payments:

• With VAT invoice: 1.5%
• Without VAT invoice: 15%

The significant difference incentivizes consultants to register for VAT. TDS on consultancy is an advance tax, meaning it can be adjusted against final tax liability when filing annual returns. Commission and incentive payments are taxed at 15% regardless of VAT status.

Small businesses have simplified taxation options:

Presumptive Tax (turnover up to NPR 30 lakh, profit up to NPR 3 lakh):

• Metropolitan/Sub-Metro: NPR 7,500/year
• Municipality: NPR 4,000/year
• Rural Municipality: NPR 2,500/year

Turnover-based Tax (NPR 30 lakh – 1 crore):

• Trading: 1% (30-50L), 0.8% (50L-1Cr)
• Services: 2% (both slabs)
• Low margin (gas, cigarette): 0.25% (30-50L), 0.3% (50L-1Cr)

Zero transaction businesses pay no tax under new rules.

Non-resident tax rates:

• Normal transactions: 25% flat rate on taxable income
• Shipping, air transport, telecom services: 5%
• Services within Nepal territory: 2%
• Profit repatriation by foreign PE: 5%
• Dividend from Nepal: 5%
• Contract payments: 5%
• Insurance premium: 1.5%
• Satellite, bandwidth, optical fiber usage: 10%

Non-residents are taxed only on Nepal-source income and cannot claim deductions available to residents.

Female taxpayers can claim:

• 10% tax rebate on computed tax liability
• Available to single women with only employment income
• Must file taxes under her own PAN (not joint assessment)

Example: If calculated tax is NPR 50,000, female rebate = NPR 5,000, Net tax = NPR 45,000

Additionally, women entrepreneurs operating micro-entrepreneurial industries get 100% tax exemption for 10 years (vs. 7 years for others).

Advance tax installments for FY 2082/83:

• End of Poush (Mid-January): 40% of estimated annual tax
• End of Chaitra (Mid-April): 70% of estimated annual tax
• End of Ashad (Mid-July): 100% of estimated annual tax

No advance tax required if total liability is less than NPR 7,500. Late payment attracts 15% per annum interest. Each installment should be 90% of the revised estimate less amounts already paid.

Startup tax benefits in FY 2082/83:

• 100% income tax exemption for first 5 years from date of operation
• Annual turnover limit increased from NPR 1 crore to NPR 10 crore
• Must be based on innovative knowledge, skills, technology, or methods
• Must be prescribed/registered by Inland Revenue Department
• Cannot be extension of existing business

This provision encourages entrepreneurship and innovation by eliminating tax burden during critical early-stage growth.

Penalties for non-compliance:

• Late income tax return: 0.1% per year of assessable income or NPR 1,200 + NPR 100/month (higher)
• Late estimated return: NPR 5,000 or 0.01% of assessable income
• Late withholding return: 2.5% per annum on tax to be withheld
• Late tax payment: 15% per annum on outstanding amount
• False statement (knowingly): 100% of tax short paid
• False statement (not knowingly): 50% of tax short paid
• Failure to maintain records: 0.1% of inclusions or NPR 1,000

Cooperative tax rates vary by type and location:

Savings & Credit Cooperatives:

• Metropolitan: 20%
• Sub-Metropolitan: 15%
• Municipality/Rural: 10%

Other Cooperatives:

• Metropolitan: 10%
• Sub-Metropolitan: 7%
• Municipality/Rural: 5%

Exempt: Agriculture and forest-based cooperatives, cooperatives operating in rural municipalities (under certain conditions). Dividends from exempt cooperatives are also tax-free.

Digital Service Tax provisions:

• Rate: 2% of transaction value
• Applicable to: Non-resident persons providing digital services to Nepali customers
• Exemption: Annual transactions up to NPR 30 lakh
• Services covered: Advertising, OTT subscriptions, cloud services, gaming, mobile apps, online marketplaces, software supply, consultancy

Non-residents must submit annual transaction details and pay DST within 3 months of fiscal year end. Income tax is not applicable if DST has been paid.

Tax amnesty schemes in Finance Bill 2082:

• VAT non-filers: File returns and pay VAT with 25% of interest by Poush 2082 end – remaining interest, penalties waived
• VAT filed but unpaid: Pay VAT with 25% of interest by Poush 2082 end – remaining interest, penalties waived
• Excise duty: Pay excise with 50% of late fees by Poush 2082 end – remaining penalties waived
• International air service providers: Register and pay VAT by Ashoj 2082 – fines and penalties waived
• Community hospitals/health organizations: Pay assessed tax by Poush 2082 – all penalties waived

These schemes provide relief for taxpayers to regularize their compliance status.