Changes Made

in
Income Tax Act, 2058
by
Finance Ordinance 2078
 COVID- 19 RELIEF
TAX EXEMPTIONS FOR BUSINESS FOR FY2077/78
1. Presumptive Tax Payer under Section 4(4)
Tax Amount
Area
Existing Provision New Provision Remarks
Metropolitan & Sub Metropolitan City Rs. 7,500 Rs. 750
90 % Waiver for FY
Municipality Rs. 4,000 Rs. 400
2077/78
Other Areas Rs. 2,500 Rs. 250

2. Turnover Based Taxpayer under Section 4(4Ka)

Tax Amount
Area
Existing Provision New Provision Remarks
Up to 20 Lakhs
Metropolitan & Sub Metropolitan City Rs. 7,500 Rs. 7,500
90 % Waiver for FY
Municipality Rs. 4,000 Rs. 4,000
2077/78
Other Areas Rs. 2,500 Rs. 2,500
Above 20 Lakhs
Transaction of gas or cigarette with 3% 0.25% of 0.25% of
commission or amount addition turnover amount turnover
amount
Transaction of goods other than 0.75% of 0.75% of 75 % Waiver for FY
mentioned above turnover amount turnover 2077/78
amount
Transaction of services 2% of turnover 2% of turnover
amount amount
3. Other Person having Business Transactions up to NRs. 1 Crore
- Waiver of 50 % income tax for the year 2077/78

4. Any person carrying out the business of Hotel, Travel, Trekking, Cinema Business (Production, Distribution
and Presentation), Party Palace, Media House, Transportation or Air Service with annual transaction of more
than 1 Crore
- Only 1% income tax shall be applicable for FY 2077/78.
- Loss for FY 2076/77 and FY 2077/78, such loss can be carried forward for additional 3 years period.

5. Contribution made to Coronavirus Sankraman Roktham, Niyantran Tatha Upachar Kosh established by Nepal
Government, Provincial Government or Local Level by any person during the FY 2077/78
- Allowed as expenses under Income Tax Act, 2058

6. If any amount is expensed towards establishment of specialized hospital as prescribed by the Ministry of
Health and Population (MoHP) and medical equipment and items related with the treatment of COVID -19 from
the amount set aside for Corporate Social Responsibility (CSR) in the FY 2077/78, such amount can be claimed
as an expense for income tax purpose.
 Ammendments in Income Tax Act, 2058
Section Existing Provision
2 (Da) “Non-Business Chargeable Assets" means any land,
building and interest or security in any entity except the
following properties:
(1) Business assets, Depreciable Assets or Stocks-in-
trade,
(2) A private building owned by an individual in the
following situation:
(a) Being under ownership for a continuous period of
ten years or more, and
(b) Where that person has resided for a total period of ten
years or more continuously or at several times,
Explanation: For the purpose of this clause, "private
building" means building and the land occupied by the
building or one Ropani of land whichever is lesser.
4 (4) Notwithstanding anything contained in Sub-section (2),
the tax payable in any income year by a resident
natural person referred in clause (a) of Section 3, who has
fulfilled all of the following requirements, shall be equal to
the amount mentioned in Sub-section (7) of Section (1) of
Schedule –1:
(a) That person has only income earned from his business
having source in Nepal in that income year,
(a1) Hasn’t claimed medical expenses under Sec. 51 and
Advance Income Tax under Sec. 93,
(b) Turnover not exceeding 20 lakhs and profit not
exceeding 2 lakhs
(c) That person has so opted that this provision is applicable
in that income year.
(d) Not registered under VAT.
New Provision
“Non-Business Chargeable Assets" means any land, building and
interest or security in any entity except the following properties:
(1) Business assets, Depreciable Assets or Stocks-
in-trade,
(2) A private building owned by an individual in the following
situation:
(a) Being under ownership for a continuous period of ten
years or more, and
(b) Where that person has resided for a total period of ten years
or more continuously or at several times,
Explanation: For the purpose of this clause, "private building"
means building, the land occupied by the building and the
additional area occupied by the building or one Ropani of land
whichever is lesser.
Notwithstanding anything contained in Sub-section (2), the tax
payable in any income year by a resident natural person referred in
clause (a) of Section 3, who has fulfilled all of the following
requirements, shall be equal to the amount mentioned in Sub-section
(7) of Section (1) of Schedule –1:
(a) That person has only income earned from his business having
source in Nepal in that income year,
(a1) Hasn’t claimed medical expenses under Sec. 51 and
Advance Income Tax under Sec. 93,
(b) Turnover not exceeding 30 lakhs and profit not exceeding 3 lakhs
(c) That person has so opted that this provision is applicable in that
income year.
(d) Not registered under VAT.
 4 (4Ka) Notwithstanding anything contained in Sub-section (2), Notwithstanding anything contained in Sub-section (2), the tax
the tax payable in any income year by a resident payable in any income year by a resident natural person
natural person referred in clause (a) of Section 3, who has referred in clause (a) of Section 3, who has fulfilled all the following
fulfilled all the following requirements, shall be equal to the requirements, shall be equal to the amount mentioned in Sub-section
amount mentioned in Sub-section (17) of Section (1) of (17) of Section (1) of Schedule –1:
Schedule –1: (a) That person has only income earned from his business having
(a) That person has only income earned from his business source in Nepal in that income year,
having source in Nepal in that income year, (b) The profit earned from business exceeds 10 Lakhs rupees
(b) The transaction from business exceeds 20 Lakhs and transaction from business exceeds 30 Lakhs rupees but
rupees but doesn’t exceed 50 Lakhs rupees, doesn’t exceed 1 Crore rupees,
(c) That person is not registered under VAT, (c) That person is not registered under VAT,
(d) Doesn’t fall under the expert or consultancy services (d) Doesn’t fall under the expert or consultancy services of
of doctor, engineer, auditors, lawyers, sportsmen, actors doctor, engineer, auditors, lawyers, sportsmen, actors or
or consultant. consultant.
10 (Tha) No Provision The amount earned as per their objectives by Mutual Fund
as approved by the Securities Board of Nepal
10 (Da) No Provision The amount earned as per their o bjectives by any educational
institution with the motive of not earning or distributing
any profit as per the agreement with Nepal Government
or any entity associated with Nepal Government.
11 (1) No tax shall be levied on agriculture income other than No tax shall be levied on agriculture income other than income
income earned by carrying on agricultural business by getting
earned by carrying on agricultural business by getting one registered
one registered as a firm, company, partnership and corporate
as a firm, company, partnership and corporate body and on
body and on agricultural income earned by an agricultural
agricultural income earned by an agricultural business in the land as
business in the land as referred to in clauses (d) and (e) of
referred to in clauses (d) and (e) of Section 12 of The Lands Act,
Section 12 of The Lands Act, 2021(1964).
2021(1964).
However, 50% tax rebate shall be provided on the tax applicable
on income earned by carrying on agricultural business by getting
one registered as a firm, company, partnership and corporate
body.
11 (3Nga) Following tax concession shall be provided on export Following tax concession shall be provided on export income
income having Nepal source for any financial year: having Nepal source for any financial year:
(a) Incase of Natural Resident Person, if the tax to be (a) Incase of Natural Resident Person, if the tax to be levied is
 levied is 20%, 25% concession on the tax amount and if 20%, 25% concession on the tax amount and if the tax to be levied
the tax to be levied is 30%, 50% concession on the tax is 30%, 50% concession on the tax amount,
amount, (b) Incase of entity, 20% concession on the tax amount,
(b) Incase of entity, 20% concession on the tax amount, (c) Incase of manufacturing industry which exports the product as
(c) Incase of manufacturing industry which exports the manufactured by the industry, additional 35% concession shall be
product as manufactured by the industry, additional 25% provided in addition to the concession as per clause (a) and (b).
concession shall be provided in addition to the concession
as per clause (a) and (b).

11(3Da) Special Industry established in Industrial Area or Industrial Special Industry established in Industrial Area or Industrial village or
village shall be provided with 25% concession on the transferred to Industrial Village shall be provided with 50%
applicable tax rate for 5 years from the date of operation. concession on the applicable tax rate for 3 years from the date of
production and 25% concession for the next 5 years.
11 (3Dha) No Provision 20% concession shall be provided on the tax applicable
on the income earned from the sale of raw material and
auxiliary raw material to special
industry which is produced in the country.
11 (3Na) No Provision 100% exemption shall be provided on the tax applicable to
Startup Business as prescribed by the department which earns
up to 1 Crore annually with innovative knowledge, thinking,
way, technology.
11 (3Pa) No Provision If any special industry which is in operation in Kathmandu
Valley transfer and operates its business outside Kathmandu
valley, 100% exemption shall be provided for 3 years and 50%
concession for the next 2 years from the date of such transfer
and operation.
11 (3Pha) No Provision If any industry uses only such materials which directly impacts
the environment as raw material and produces goods, such
industry shall be provided with 50% concession for the first
3 years and 25% concession for the next 2 years from the
date of operation.
12 (Ga) No Provision If any person provides seed capital up to Rs. 1 Lakh to
maximum 5 Startup Businesses and such startup business is
 not a related party, then
such seed capital can be claimed as an expense.
47 Ka (6) Intent of business combination shall be submitted to IRD Intent of business combination shall be submitted to IRD within
within Ashadh End 2078. Ashadh End 2079
47 Ka(7) Intent as per Sec 47ka(6) by the entity with respect Intent as per Sec 47ka(6) by the entity with respect to
to conclusion of business combination shall be conclusion of business combination shall be submitted to IRD
submitted to IRD within Ashadh End 2079 within Ashadh End 2080
75 (2) The Department shall make available the circular issued The Department shall make available the circular issued pursuant
pursuant to Sub-section (1) in the Department or in to Sub-section (1) on the website of the Department or National
any other places as per necessity or through any other Level Newspaper or through any other electronic medium.
means.
79 (1) Any document required to be given or delivered to Any document required to be given or delivered to any person
any person pursuant to this Act shall be deemed to pursuant to this Act shall be deemed to have been given or
have been given or delivered to that person in the delivered to that person in the following circumstances:-
following circumstances:- (a) Where it is faxed to the address of that person,
(a) Where it is sent to the fax number or email address (b) Where it is delivered by hand to whom it has to be
of that person, delivered or to the manager of an entity, in the case of
(b) Where it is delivered by hand to whom it has to the entity, or
be delivered or to the manager of an entity, in the (c) Where it is sent by a registered post to his resident,
case of the entity, or office, business or other address to the extent known.
(c) Where it is sent by a registered post to his resident,
office, business or other address to the extent
known.
88(1)(8) 2.5 % TDS on payment for the freight to transportation 2.5 % TDS on payment for the freight to transportation service.
service. However, in case of VAT registered transportation service provider
However, in case of VAT registered transportation service or person providing transportation vehicle on rent, TDS shall be
provider or person providing transportation vehicle on deducted at 1.5%
rent, TDS shall be deducted at 1.5%
88 (1) (9) 10 % TDS shall be withheld on the interest paid by 10 % TDS shall be withheld on the interest paid by resident
resident bank and financial institution to foreign bank bank and financial institution to foreign bank or other financial
for the investment made in area as prescribed by Nepal institution for the investment made in area as prescribed by
 Rastra Bank. Nepal Rastra Bank.
88 (1) No Provision 5 % TDS shall be withheld on the registration fee, education fee
(10) and exam fee paid to foreign school or university.
88 (1) No Provision 5 % TDS shall be withheld on the interest paid by Resident
(11) Bank & Financial Institutions to Life Insurance Companies.
88 (4) No Provision Interest paid on the loan from Cooperative Bank or Loan
(Kha1) between cooperative societies
88 (4) Interest and dividend paid to Mutual Fund Interest and dividend paid to Mutual Fund
(Nga)
92 (1) Payment of vehicle rent, freight made to resident Payment of vehicle or transportation vehicle rent, freight
(Ta) natural person other than sole proprietor made to resident natural person other than sole proprietor
95 Ka (2) Gain on disposal of Interest in any Resident entity Gain on disposal of Interest in any Resident entity (Listed):
(Ka) (Listed): Resident Natural Person:
Resident Natural Person 5% Holding period Less than 365 days 7.5 %
Resident Entity 10 % Holding period more than 365 days 5%
Other 25 % Resident Entity 10 %
Other 25 %
95 Ka (4) Notwithstanding anything contained in Sub-section Notwithstanding anything contained in Sub-section (2), no
(2), no advance income tax shall be collected on the advance income tax shall be collected on the disposal of
disposal of investment made by Mutual Fund. investment made by Mutual Fund.
95 Ka (6 No Provision If any person provides software or similar electronic service
Kha) outside Nepal and receives payment for the same in foreign
currency, 1 % TDS shall be withheld by the concerned Bank,
Financial Institution and Money Transfer that receives such
payment.
96(2)(Ga) The income return must be accompanied by the The income return must be accompanied by the followings;
(3) followings; 1)……………
1)…………… 2) Any details made available to that person pursuant to
2) Any details made available to that person Sub-section (4)
pursuant to Sub-section (4) 3) Evidence of choice, if any made pursuant to Sub-section
3) Evidence of choice, if any made pursuant to Sub- (4) of Section 4, and
 section (4) of Section 4, and 4) Any other Information and details as specified by the
4) Any other Information and details as specified by department.
the department.
116 (5) No Provision While making an appeal as per Sub-Section (1), the application
shall make a deposit or provide a bank guarantee of 100% of
undisputed tax amount and 50% of disputed tax amount, fees
and penalties.
116 (6) No Provision While calculating the deposit or Bank Guarantee under
Sub-Section (5), it should also incorporate the 25% of the tax
amount paid at the time of Administrative Review.
Schedule No Provision Notwithstanding anything contained elsewhere in this Section,
1 (1) in cases where any resident natural person has a pension
(9Ka) income, tax shall be computed pursuant to this Section only on
the amount remaining balance after subtracting an additional
twenty-five percent of the amount mentioned in clause (a) of
Sub-section (1) for the natural person or in clause (a) of Sub-
section (2) for the spouse from the taxable income.
However, the limit of the amount so deducted shall not be more
than prescribed.
Schedule No Provision Notwithstanding anything contained elsewhere in this Section,
1 (1) in case any resident natural person insures the private
(16Ka) building in his/her ownership from resident insurance
company, tax shall be computed pursuant to this Section only
after the deduction of annual insurance premium or Rs. 5,000
whichever is lower.
Schedule Up to 20 Lakhs Up to 30 Lakhs
1 (1) (17) Business operating in; Business operating in;
Metropolitan/Sub metropolitan city Rs. 7,500 Metropolitan/Sub metropolitan city Rs. 7,500
Municipality Rs. 4,000 Municipality Rs. 4,000
Other Area Rs. 2,500 Other Area Rs. 2,500
More than 20 Lakhs up to 50 Lakhs More than 30 Lakhs up to 50 Lakhs
Transaction of gas, cigarette, with Transaction of gas, cigarette, with
3% commission or amount addition 0.25 % of Turnover 3% commission or amount addition 0.25 % of Turnover
Transaction of goods other than Transaction of goods other than
mentioned above 0.75 % of Turnover mentioned above 1 % of Turnover
Transaction of service 2 % of Turnover Transaction of service 2 % of Turnover

More than 5 Lakhs up to 1 Crore

Transaction of gas, cigarette, with
3% commission or amount addition 0.30 % of Turnover
Transaction of goods other than
mentioned above 0.8 % of Turnover
Transaction of service 2 % of Turnover