| Nepal Income Tax Rates for Individuals The taxable income of a resident individual for will be taxed at the following rates:
Up to Rs. 160,000: 1%
From Rs. 160,000 - to Rs. 260,000: 15% + Rs. 1,600
Above Rs. 260,000: 25% + Rs. 16,600.
The taxable income of a couple when joint filing, will be taxed at the following rates:
Up to Rs. 200,000: 1%
From Rs. 200,000 - to Rs. 300,000: 15% + Rs. 2,000
Above Rs. 300,000 - 25% + Rs. 17,000.
- The business person who have registered own Proprietary firm should not pay above 1 (one)% tax.
- Any individual or couple having pension income can enjoy 25 percent of the normal exemption limit as an additional basic exemption.
- Any individual working in prescribed remote area is entitled to deduct prescribed amount as remote area allowance from taxable income.
- Any individual is entitled to deduct the following amount from taxable amount, if he is having investment insurance policy :
"Rs. 20,000 amount or the actual premium paid, which ever is less."
- For the purposes of the Act, net gains from the disposal of non-business chargeable assets will be taxed at the rate of 10 percent.
- The presumptive tax for individuals conducting small businesses (who have a turnover of Rs.2 million or an income of Rs.200, 000) in the Metropolitan or Sub-Metropolitans, Municipalities and anywhere else in Nepal amounts to Rs 5,000 Rs. 2,500 and Rs.1,500 respectively.
- The taxable income of a non-resident individual is taxed at the rate of 25 percent.
- The taxable income of an entity will be taxed at the rate of 25 percent unless prescribed otherwise.
- The taxable income of a bank, or financial institution, or general insurance business, or an entity conducting petroleum work under Petroleum Act, 2040 for an income-year is taxed at the rate of 30 percent.
- Gain from Lump sum retirement payment made by an approved retirement fund or GON is taxed at the rate of 5 percent as a final withholding tax. Gain is calculated by deducting 50 percent of the payment or Rs. 500,000 whichever is higher from the total lump sum payment.
- The taxable income derived by an individual from special industry or export business will be taxed at the rate of 20 percent.
- The taxable Income derived by an entity engaged in an industrial enterprise or export business or derived from operating any road, bridge, tunnel, ropeway, or flying bridge. Construction business or any trolley bus or tram manufacturing business is taxed at the rate of 20 percent.
- The taxable income of an entity engaged in power generation, transmission, or distribution is taxed at the rate of 20 percent.
- The taxable income of an estate of a deceased resident individual or trust of an incapacitated resident individual will be taxed at the normal tax rate as though the estate or trust was a resident individual.
- The repatriated income of a foreign permanent establishment of a non-resident person situated in Nepal will be taxed at the rate of 10 percent.
- The taxable income of a non-resident person deriving income from providing shipping, air transport or telecommunication services in Nepal will be taxed at the rate of 5 percent.
- The taxable income of an entity wholly engaged in the projects conducted by any entity so as to build public infrastructure, own operate and transfer it to the HMG/N in power generation, transmission, or distribution for an income-year shall be taxed at the rate of 20 percent.
Business Exemptions, Exempt Amounts and Other Concessions
- The following amounts are exempt from tax :
A. Amounts derived by a person entitled to privileges under a bilateral or a multilateral treaty concluded between Government and a foreign country or an international organization;
B. Amounts derived by an individual from employment in the public service of the government of a foreign country, provided that, the individual is a resident person solely by reason of performing the employment or is a non-resident person; and the amounts are payable from the public funds of the country;
C. Amounts derived from public fund of the foreign country by an individual who is not a citizen of Nepal or by a member of the immediate family of the individual.
D. Amounts derived by an individual who is not a citizen of Nepal from employment by Government on terms of a tax exemption;
E. Allowances paid by Government to widows, elder citizens, or disabled individuals;
F. Amounts derived by way of gift, bequest, inheritance, or scholarship, except as required to be included in calculating income under this Act;
G. Amounts derived by an exempt organization by way of gift; or other contributions that directly relate to the organization's function, whether or not the contribution is made in return for consideration provided by the organization, and
H. Pension received by a Nepali citizen retired from the army or police service of a foreign country provided the amounts are payable from the public fund of that country.
- An agricultural income derived from sources in Nepal during an income-year by a person, other than the income from an agriculture business derived by a registered firm, or company, or partnership, or a corporate body, or through the land above the land holding ceiling as prescribed in the Land Act, 2021, is exempt from income tax.
- Incomes derived by cooperative societies, registered under Cooperative Act, 2048 (1991), from business mainly based on agriculture and forest products such as sericulture and silk production, horticulture and fruit processing, animal husbandry, diary industries, poultry farming, fishery, tea gardening and processing, coffee farming and processing, herbiculture and herb processing, vegetable seeds farming, bee-keeping, honey production, rubber farming, floriculture and production and forestry related business such as lease-hold forestry, agro-forestry, cold storage established for the storage of vegetables and business of agricultural seeds, insecticide, fertilizer and agricultural tools (other than machine operated)and rural community based saving & credit cooperatives are exempt from tax. Dividends distributed by such societies are also exempt from tax.
Capital Gains Tax
The Nepali government has lowered the capital gains tax to 10% from 15% in 2009.
International Taxation
- For taxation purposes, all payments and gains need to be considered on the basis of the source country of the payment. Details of the circumstances under which the source rules are defined are given in the Act.
- Tax is imposed on the repatriated income of a foreign permanent establishment of a nonresident person situated in Nepal.
- A non-resident person carrying on a business of charterer or air transport operator are taxed at a flat rate on their amounts derived from carriage of passengers, mail or goods which embark in Nepal. The provision is also applied to nonresident persons who transmit messages by any technical means if the apparatus is established in Nepal.
- A tax credit may be claimed for any foreign income tax paid with respect to foreign source income. The tax credits are calculated separately for assessable foreign income sourced in each country and will not exceed the average rate of Nepal income tax applied to the assessable foreign income.
Nepal Corporate Tax RatesThe present rate of corporate tax is 25%. However, industries, other than cigarette, bidi, cigar, khainy, tobacco, alcohol or beer, will not be imposed more than 20% income tax on their industrial come.
Nepal Value Added Tax (VAT)Value Added Tax rate in Nepal is 13%.
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