Income Tax Rates, Provisions and Concessions


With more aspirations and strong will to tap the additional economic potential, the Nepal Government presented its new budget on May 28, 2020.

Finance Minister Yuba Raj Khatiwada presented the NPR 1.47 billion budget for FY 2077-78 (2020-21), with a slew of measures including sector-wise priorities and policy-level decisions.

Out of the total budget for the new fiscal, NPR 949 billion has been categorized as current expenditure, followed by NPR 353 billion as capital expenditure and NPR 173 billion as the financial provisioning.

Finance Minister Yubaraj Khatiwada

With due emphasis of safe and secure social welfare, the government continued focus on infrastructure development across multiple areas.

“Enhance state’s role in public welfare by fulfilling requirements that are considered fundamental rights and basic necessities of the citizen,” reads one of the budget priorities.

Taxation is one critical area that is closely related to the public and nation’s economic development.

Under the new revenue policy for FY 2020-21, the government proposed to have a future-oriented, transparent and business-friendly taxation system.

The government called for enhanced participation of taxpayers and efficient revenue management through health and friendly tax administration and control leakage of

Let’s see what the new Budget FY 2020-21 proposed under different taxes:

For Individuals

1) Personal Tax

  • Residents: Natural Person

A) Employed Individuals

Income Level (NPR) Tax (FY 2020-21)
Up to 4 Lakh 1%
Next 1 Lakh 10%
Next 2 Lakhs 20%
Next 1,300,000 30%
Additional Tax: Above 2,000,000 36%***

 B) Employed Couple

Income Level (NPR) Tax (FY 2020-21)
First 450,000 1%
Next 100,000 10%
Next 200,000 20%
Next 1,250,000 30%
Additional Tax: Above 2,000,000 36%***
Source of Income Tax (2020-21)
Normal transactions 25%
Through shipping, air or telecom services, postage, satellite and optical fiber project 5%
Shipping, air or telecom services through the territory of Nepal 2%
Repatriation of profit by Foreign Permanent Establishment 5%

2) Corporate Income Tax

  •  For Entities – Company/Firm/Industry
Type of Business Normal Tax Rate Rebate Applicable Tax Rate
Normal Business 25% 25%
Special Industry under section 11 for whole year 25% 20% 20%
Constructing and operating ropeway, cable car, railway, tunnel or sky bridge 25% 40% 15%
Constructing and operating roads, bridges, tunnel, railway, and airports 25% 50% 12.5%
Having export income from source in Nepal 25%*** 20% 20%
Banks and financial institutions 30%*** 30%
General Insurance 30%*** 30%
Engaged in tobacco, alcohol and related products 30%*** 30%
Telecom and Internet Services 30%*** 30%
Capital market, securities, and related 30%*** 30%
Type of employment provided Tax Concessions (FY 2020-21)
Direct employment to 100 or more Nepalese citizens throughout the year *10 % of AR/NR
Direct employment to 300 or more Nepalese citizens throughout the year *20% of AR/NR
Direct employment to 500 or more Nepalese citizens throughout the year *25% of AR/NR
Direct employment to 1,000 or more Nepalese citizens throughout the year *30% of AR/NR
Concessions to special industries, by geography Tax Concessions (FY 2020-21)
Very underdeveloped areas 90% of the AR (for 10 yrs from the date of commercial production)
Undeveloped areas 80% of the AR (for 10 yrs from the date of commercial production)
Less developed areas 70% of the AR (for 10 yrs from the date of commercial production)

Likewise, there are concessions to industries by investment amount, presence in SEZs, and special areas.

2) Customs Duty

  • Micro, cottage and small industries will get 50 percent exemption on machinery imports
  • Increase in customs duty on petroleum product imports from NPR 15,200 to NPR 25, 200
  • Increase in customs duty on import of gold or semi-manufactured forms or in powder from NPR 5,000 to NPR 8,500 per tola

3) Value-Added Tax (VAT)

  • 13 percent VAT on goods and services remains unchanged from the previous year
  • VAT on goods exports shall remain ‘zero’ percent
  • VAT paid by UN on its products and services for Covid-19 response shall be refunded
  • Individuals operating without VAT registration, even after recommended, may be penalized with 50 percent of payable tax
  • Transportation, tourism and movie theatres may now pay tax on a trimester basis

4) Other Key Taxes and Fees

a) Education Services

Students going abroad for higher education at 2% of the foreign exchange facility availed from Banking and Financial Institutions (BFIs)

b) Infrastructure Development

Petrol and diesel imports into Nepal will be subjected to this tax at Rs. 10 per liter for development at the customs point

c) Pollution Control

Petrol and diesel sales within Nepal will be paying these taxes at NPR 1.5 per liter

d) Telecom Services

New connections or ownership transfer on fixed-line services will be charged Rs 500 per connection, and mobile phone recharges will pay an additional 2% of the total value

e) Casino Royalty

Licensed casino operators, per license, will pay NPR 40 million per annum and operating modern machine and equipment will pay NPR 10 million per annum

In Conclusion
There are also other tax rates, provisions and concessions under different taxation sections for individuals and entities across varying levels of income.

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