AMENDMENTS IN TAX LAWS

BY NEPAL BUDGET 2078

Arun Raut, FCA

Budget Achievement-2077/78
Achievement

2077/78
Utilisation
%
Recurrent 91.40%
Revenue Target
Achievement
Capital 71.30%
94.80%
Financing Provision 85.20%
Total 85.90%
Budget 2078/79 In Kharab
Budgeted
2078/79
Utilisation
Amount %
Recurrent 6.79 41.20%
503 points
Capital 3.74 22.69%
342 points last year
Financing Provision 2.08 12.62%
State and Local Level 3.87 23.48%
Total 16.48 100.00%

Growth expected
2078/79
around 4% in 77-78 Source
Amount %
Revenue 10.25 62.20%
Foreign Subsidy 0.64 3.88%
Foreign loan 3.09 18.75%
Interal loan 2.50 15.17%
Total 16.48 100.00%
Effective Date of Applicability
Particulars Section Effective Date
Finance Act 1 Immediately
Custom Rate 2 Immediately
Custom Service Charge 3 Immediately
Agricultural Improvement Charge 4 Immediately
Excise 5 Immediately
VAT 6 Immediately
Health Risk Tax 7 Immediately
Education Service Tax 8 Immediately
Infrastructure Development Tax 9 Immediately
Road Construction Fee 10 Immediately
Road Repair and Maintenance Fee 11 Immediately
Film Development Charges 12 Immediately
Pollution Control Charges 13 Immediately
Telephone Ownership Fee 14 1st Shrawan 2078
Telecommunication Service Charges 15 1st Shrawan 2078
Casino Royalty 16 1st Shrawan 2078
Provision Relating to Social Security Fund 17 1st Shrawan 2078
To decrease, increase or provide rebate on rate 18 1st Shrawan 2078
Can simplify process or remove obstacles 19 1st Shrawan 2078
Effective Date of Applicability
Particulars Section Effective Date
Provision relating to rebate of Fee, additional charges and Penalty for tax return 20 Immediately
Waiver of Tax Dues 21 Immediately
Tax Relief on issuing certificate of origin 22 Immediately
Relief to trekking and tour package 23 Immediately
Special provision relating to rebate to health institution 24 Immediately
Expenses to be claimed on Transportation service for 75/76 25 Immediately
Renewal of Excise 26 Immediately
License fee for GSM Royalty to NTC 27 Immediately
Tax Relief for impacted from Covid 19 28 Immediately
Contribution to covid Relief 29 Immediately
Expenditure for Covid Relief expenditure 30 Immediately
Expenditure under CSR for Covid 19 relief 31 Immediately
Transfer of fund to SSF 32 Immediately
Renewal of Private Firm and Company 33 Immediately
Land and building registration 34 1st Shrawan 2078
Amendments in VAT Act 2052 35 Immediately
Amendments in Excise Act 2058 36 Immediately
Amendments in Income Tax Act 2058 37 1st Shrawan 2078
Amendment in Custom Act 2058 38 Immediately
Amendment in Telecommunication Act 2053 39 Immediately
Tax Benefit
20. Vat, Excise and Income Tax assessed till 2077 Ashad except falsified
or duplicate vat bill
Cases : can be at administrative review, revenue Tribunal or court
Condition: take back the case till 2078 Mangsir End and pay Tax liability
of income tax, vat and excise and 50% of interest till the date of taking
back the case.
No additional interest and penalty
Waiver is 50% interest and Penalty

21 (1) Vat, Excise and income tax due as per old act, if paid 75% of the tax
till Poush End 2078, remaining tax, fines and penalties is waived.
Tax Benefit

21 (2) Vat, Excise and Income Tax assessed till 2076 Ashad end except
falsified or duplicate vat bill dues
Condition: till 2078 Poush End and pay Tax liability of income tax, vat and
excise and all of interest till the date of paying.
No additional penalty

21 (3) Non profit oriented community hospital, health institution and

operating transportation service on electronic network
Condition: Not on legal process, assessed for income tax and vat by IRD
before Jestha 14, 2078, can apply for clearance of dues
Tax Benefit
22. No vat, interest and penalty for entity issuing certificate of origin till
Jestha 14, 2078

23 Travel and Trekking agency submitting travel and trekking service on

non vatable transaction without collecting vat till 2078 Jestha 14,
Can self declare vat and pay till 2078 Poush,
Special fee, Interest and penalty is waived.
Even if assessed by IRD, need to pay only vat amount till 78 Poush,
If legal cases undergoing, can take back case and pay the amount

24, Health institution requiring to pay vat on purchase and assets not
setoff with the sales can pay vat up to 2079 Ashad. Special fee and
interest is waived. Not talked about penalty.
Tax Benefit
25) if in FY 2076/77, transport entity has taken on rent the vehicle from
the individual person and has deposited TDS, it can be claimed as
expenses although there is no invoice.

26) Renewal of excise license till 2078 Shrawan end by paying renewal fee
of each relevant year; penalty is waived. If not renewed on that time
frame, it will be automatically be void.

27) To NTC GSM mobile licenses paid in instalment can be claimed in

relevant year on cash basis and is allowed for deduction.
Tax Benefit for FY 2077-78
28. (1) 90% Rebate on Income Tax (Proprietorship without Vat)
Metropolitan & Sub Metropolitan = 7,500 Less 90%= 750
DO1
Municipality =4,000 Less 90%= 400
Other =2,500 Less 90%= 250

28. (2) 75% Rebate on Income Tax for DO2 (Proprietorship without Vat)
Gas, Cigarette= 0.25% Less 75% = 0.000625%
DO2 Other =0.75% Less 75% = 0.001875%
Service= 2% Less 75%= 0.5%

28. (3) 50% rebate on Income tax of business having annual transaction upto Nrs. One Crore.

DO3 25.(4) 1% income tax to Hotel, Travel, Trekking, Film business (production, distribution and
show), Party Palace, Media house, Transportation and Air Service having annual transaction
of more than Nrs. One Crore. 76/77 and 77/78 loss can be carried forward for additional 3
years.
Tax Benefit for FY 2077-78
29. Donation to Corona Relief fund in FY 2077/78 established by
Central, State or Local Government claimable under Income Tax
Computation

30. Custom, excise and vat waived till 2078 Poush on import of health
related goods and medicine including oxygen, others including
remdesiver.

31. expenses made under CSR for construction special covid hospital
as instructed by ministry of health and on material and health
equipments related to treatment of covid 19 is allowed to be
deducted in FY 2077/78
Tax Benefit for FY 2077-78
32. TDS as per section 88 of Income tax (ie; 5% or 15%) is not
applicable for transfer of fund from Approved Retirement Fund (ie; PF,
CIT) to SSF within 2078 Chaitra End.

33. Return not submitted and renewal not paid by Private Firm or
company till 2075/76 can submit return till 2078 Aswin and pay 10%
of fee and penalty for renewal
AMENDMENTS IN VAT ACT AND
RULES

Arun Raut, FCA

30th May 2021
Amendments in VAT Act

Section 10 (2) has to register within 30 days.

No list of goods for compulsory registration in VAT.

No time frame for biometric, has to be done

immediately
Amendments in VAT Act
Compulsory Vat Registration
Any person operating following business in Metropolitan, Sub-Metropolitan, Municipality
or any areas prescribed by Inland Revenue Department

• Hardware, Sanitary • Parking Service

• Furniture, Fixtures, Furnishing
• Automobiles, Motor Parts
• Electronics
• Marble
• Education Consultancy
• Accounting and Auditing Related
Services
• Catering Service, Party Palace Business
• Dry Cleaners using Machinery Equipments
• Restaurants with Bar
• Ice Cream Industry
• Color Lab
• Boutique
• Uniform supplier at education institution,
Health Institution, or other entity.

Impact: These business can operate without vat in Municipality if sales is below 20
lacs in case of service and 50 lacs in case of Goods.
Implication due to Removal from Compulsory Vat
Registration (Section 11)

Can continue registration in vat after application with Tax officer together with
details of 12 months transaction in prescribed format.
Otherwise apply (in format of Annex 11) within 30 days of happening of condition
(ie; Ashad 13, 2078) for deregistration from vat together with Vat return and
Amount. (Rule12)
Also apply within 15 days from the date of submission of return for deregistration
the details for full audit. Tax officer need to decide within 3 months. Has to submit
return for the three months. Thereafter need not submit if no response is
received from Tax officer.
Need to pay vat on remaining amount of capitalized goods on which vat has been
claimed earlier considering Market Value as sales price.
Amendments in VAT Act

16 (KHA) No requirement for approval of sales and

purchases register from Tax officer. Has to maintain and
certify itself. Can be asked by Tax officer any time for
verification.

16 (3Ka) Computerized data processed at IRD to be

accepted has been deleted
Amendments in VAT Act

16 (3) Vat on loss, damage, breakage of goods can be

claimed as prescribed. Included expired goods as well.

20 (4 Kha) if the vat liability is amended or reduced by

Revenue Tribunal or other court having authority, the
tax officer cannot make the amended assessment.
However, if the court orders for amended assessment,
s/he can make amended assessment
Amendments in VAT Act

21 (1) Jha action against tax payers not submitting vat and
return, by publishing name to the public through publication,
communication or in website of IRD.

29 (1) cha 1 removed. 1000 penalty for unregistered not certifying

purchase and sales book.

32 (KHA) Publication of public circular in website and national

newspaper or other electronic means.
Amendments in VAT Act

33) Deposit for administrative review;

100% of undisputed and 50% of disputed vat and
penalty to be deposit in cash or bank guarantee
Clarification: deposit of 25% for administrative review
will be considered for computing
Impact: Just further clarification
Amendments in VAT Act

VAT Exempt: Addition in Schedule 1

❑ Covid and others medical equipments and materials
❑ Service charge of E-Library
❑ Rent on Transportation of goods, transport service (other
than related to supply) and cargo service.
No
❑ Sialo and service charges related to stocking farm produce in
VAT Sialo
❑ Money Exchange, Swift service, Hire Purchase Transaction
and Deposit and credit Guarantee Service
❑ Service relating to issuing Certificate of Origin for export
❑ Trekking and Tour Package related service.
AMENDMENTS IN INCOME ACT

Arun Raut, FCA

30th May 2021
Amendment in Income Tax Act

Section 2 (Da) word corrected

Capital gain tax on land
Added the word; building, land covered by the building and
land equal to the land covered by the building or One ropani of
land whichever is higher.
Impact: More land is available for not to be covered by land
tax deducted at Malpot office.

Section 2 (ka ma) word deleted

Commission deleted from the definition of service Charge .
Impact: No impact as section 88 (1) includes commission
Amendment in Income Tax Act

Section 4 (3) (KHA)

DO1 limit increase to 30 lacs and profit to 3 lacs; earlier it was 20 lacs
and profit 2 lacs. Further, condition of opting for the benefit and not
DO1
registered in vat removed.
Impact: even vat registered natural person has to pay tax as per DO1 and
its not optional

Section 4 (4 Ka) (kha)

DO2 limit revised.
Taxable profit from business to be up to 10 lacs and business transaction is
DO2 between 30 lacs to 1 crore. Further condition of not registered in vat
removed.
Impact: Profit limit imposed so now using it for showing sources of income
reduced. Further, even vat registered needs to pay tax under this.
Amendment in Income Tax Act

Section 10 (tha)
Income earned by Mutual Fund as per its objective is tax exempt
Impact: what about earlier income??? Further changes going to
increase tax liability through TDS.

Section 10 (da)
Income earned by Education institutions as per its objective
established after entering into MoU with Nepal Government or
entity of Nepal Government without profit motive or not
distribution profit
Impact: University and colleges benefiting from this.
Amendment in Income Tax Act

Section 11
50% tax relief to income earned from agriculture business after
registering a firm, partner, company or organized institutions
Impact: Agriculture business income getting this relief

Section 3 (Na) (Ga)

Export income from Productive sector industry
35% instead of 25% ie;
Entity Normal Tax 25%
Lest rebate: 5%
Less: rebate for productive 7% (35% of 20%)
Total : 13%
Impact: tax benefits
Amendment in Income Tax Act

Section 11 (3) (Da)

50% tax relief for first three years and 25% for next five years to special
industry established or transferred to industrial park or industrial gram
Impact: additional benefits

Section 11 (3) (dha)

Income earned from sale of locally manufactured ram material or
ancillary raw material to special industry will be provided rebate of
20%.
Impact: Promotion of local industry
Amendment in Income Tax Act

Section 11 (3) (na)

100% tax rebate for five years from the start of the business by
Income earned up to one crore by start up business prescribed
by IRD using new knowledge, skill, though, technology or
practices

Section 11 (3) (Pa)

Special industry that is established within Kathmandu valley will
be provided 100% rebate for first three years and 50% rebate
for next two years on income tax if its is transferred and
operated outside Kathmandu valley.
Impact:
Amendment in Income Tax Act

Section 11 (3) (FA)

Industry manufacturing new product using goods directly impacting
the environment as raw materials will be provided 50% rebate for
first three years from the start of the transaction and 25% rebate
for next two years.

Section 12
Seed capital invested in start up business other than to related
parties for maximum up to One Lacs per business for up to 5 lacs is
allowed for deduction.
Impact: attractive for investors of start ups.
Amendment in Income Tax Act

Section 47 (Ka)
Merger and acquisition benefit allowed only to entities (BFIS and
Insurance) within same class up to 2079 Ashad. Merger/ acquisition to
be completed within 2080 Ashad.
Impact: Merger/acquisition of other class entity not promoted.

Section 75 Public Circular

Notice regarding public circular can be published in IRD website,
national level newspaper or through electronic medium.
Amendment in Income Tax Act

Section 79 Notice
Fax instead of telefax and telex. Word corrected.

Section 88 (1) (8) clarification removed

1.5% TDS on transportation service registered in Vat
Impact: as vat is removed in transportation service other than for
supply, this has been removed. Now 2.5% TDS is required.
Amendment in Income Tax Act

Section 88 (1) (9)

10% TDS on interest to be deducted by Bank availing loan from
foreign bank and other financial institutions
Impact: 10% instead of 15%

Section 88 (1) (11)

5% withholding tax on registration fee, education fee and
examination fee paid to foreign school or university
Impact: earlier 15% was charged treating it as exchange facility
Amendment in Income Tax Act

Section 88 (1) (12)

5% TDS on interest on deposit paid by resident bank to Life
insurance company.
Impact: Earlier 15% TDS was applicable.

Section 88 (4) (KHA1)

No, TDS on interest on loan between Cooperative Bank and
cooperative institutions.
Impact: its only for loan; not on deposits
Amendment in Income Tax Act

Section 88 (4) (Na)

No TDS on dividend and interest paid to Mutual fund. Removed.
Impact: Now TDS will be applicable

Section 92 (1) (TA)

Final withholding payment for natural person other than firm; from
transportation, transport service or vehicle rent.
Impact: Now natural person need not submit return
Amendment in Income Tax Act

Section 95 KA (2) (Ka)

7.5% TDS on gain on shares of resident natural person for
shares disposed within 365 days while 5% TDS on gain on
shares disposed after 365 days.
Impact: Trades and investors segregated for natural person

Section 95 KA (4) Removed

Final withholding tax will not be collected from gain on sale
made by Mutual fund.
Impact: TDS may be applicable
Amendment in Income Tax Act

Section 95 KA (6) (Kha)

1% withholding tax to be deducted at the time of receiving
foreign exchange by BFIS or money transfer making payment to
any person providing software or similar nature electronic service
outside Nepal.
Impact: Introduced taxing mechanism for person and entity
providing service abroad .

Section 96 (2) GA Removed

Details to be submitted with tax return.
Impact: Not relevant
Amendment in Income Tax Act

Section 116 (5) & (6) added

(5) At the time of filing appeal at the revenue tribunal, 100% of the
undisputed tax and 50% of the disputed tax, fee and penalty to be
deposited or Bank Guarantee to be provided.
(6) While computing such 50%, 25% deposit made during administrative
review shall also need to be considered.
Impact: Great Relief through bank guarantee.

Annexure 1
Pension Income given 25% of first slab
Impact: re introduced.
Amendment in Income Tax Act

Annexure 1
Natural person making insurance premium on personal house can be
allowed for deducting up to Nrs. 5,000 or actual whichever is lower.
Impact:

Annexure 1
Gas, Cigarette transaction from 30 to 50 lacs= 0.25%
From 50 lacs to 1 crore= 0.30%
Other goods
30 lacs to 50 lacs=1%
50 lacs to 1 crore=0.8%
Service=2%
Impact: tax may get increased.
Questions Please
 Arun Raut, FCA
arautofficial@gmail.com