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Taxation in Nepal
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Taxation in Nepal


The taxpayers on whom income tax is imposed are persons. A person can be a natural person, who is an individual or a couple but includes also a proprietorship, or it can be an artificial person, i.e. an entity. An entity means a partnership, trust, company, and foreign permanent establishment or government body.

The Act distinguishes between resident and non-resident persons. A resident person is an individual whose normal place of abode is in Nepal and who is present at any time of the year, or who is present in Nepal for 183 days or more, or who is an employee of Government of Nepal posted abroad at any time during the year.

A trust is a resident person if it is established in Nepal, or has a resident person as a trustee, or is controlled by a resident person. A Company residing in Nepal and if it is incorporated under the laws of Nepal or has its effective management in Nepal. Partnerships are always resident persons. Permanent establishments are places where a person carries on a business and are subject to tax if they belong to a non-resident person and are situated in Nepal.

For every person the tax is imposed and calculated for an income year. The income year corresponds with Government’s Fiscal Year, i.e. the period from the start of Shrawan of a year to the end of Ashad of the following year (mid-July to mid-July).

Assessable Income

The assessable income of a person for an income-year from any employment, business, or investment is:

• in the case of a resident person, the person's income from the employment, business, or investment of the year irrespective of the location of the source of the income; and

• in the case of a non-resident person, the person's income from the employment, business, or investment of the year but only to the extent the income has a source in Nepal.

The assessable income does not include any income exempt under sections 11 or 64 of the Act (such as income from non-business agriculture and agriculture business conducted in the land of the type that is mentioned in clauses (d) and (e) of section 12 of the Land Act, 2021; income of cooperative society from business mainly based on agriculture and forest products and cooperative saving and credit scheme based on rural community; and income of approved retirement fund).

Taxable Income

The taxable income of a person for an income-year is equal to the amount as calculated by subtracting reduction, if any, claimed for the year under section 12 (gifts to an exempt organisations) or 63 (retirement contribution to an approved retirement fund) from the total of the person's assessable income for the year from each of the following income heads:

• business;
• employment; and
• investment.

Tax Rates

The taxable income of a resident individual for an income-year 2066/67 will be taxed at the following rates:

• up to Rs.160,000 – 1%;
• from Rs.160,000 up to Rs.260,000 – @ 15 % plus Rs.1,600;
• above Rs. 260,000 – @ 25% plus Rs.16,600.

The taxable income of a couple, if they chose to be treated as a couple will be taxed at the following rates:

• up to Rs.200,000 – 1%;
• from Rs.200,000 up to Rs.300,000 – @ 15 % plus Rs.2,000;
• above Rs. 300,000 – @ 25% plus Rs.17,000.

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