All information contained within this document is believed to be correct at the time of publication. While utmost care has been taken in its compilation, no responsibility will be accepted for any inaccuracies, errors or omissions. This publication should not be regarded as offering a complete explanation of any matter contained within it. BizSewa is not responsible for the usage of the information by anyone in any form.
| Tax Banding (Unmarried person) | 2022-23 (FY 2079-80) | Income Tax Rates | Previous Year (For reference) | |
|---|---|---|---|---|
| (a) Band 1 | First 500,000 | 1% * | First 400,000 | 1% * |
| (b) Band 2 | Next 200,000 | 10% * | Next 100,000 | 10% * |
| (c) Band 3 | Next 300,000 | 20% * | Next 200,000 | 20% * |
| (d) Band 4 | Next 10,00,000 | 30% * | Next 13,00,000 | 30% * |
| (e) Additional Tax | Remaining above 2,000,000 | 36% * | Remaining above 2,000,000 | 36% * |
| Tax Banding (married person) | 2022-23 (FY 2079-80) | Income Tax Rates | Previous Year (For reference) | |
|---|---|---|---|---|
| (a) Band 1 | First 600,000 | 1% * | First 450,000 | 1% * |
| (b) Band 2 | Next 200,000 | 10% * | Next 100,000 | 10% * |
| (c) Band 3 | Next 300,000 | 20% * | Next 200,000 | 20% * |
| (d) Band 4 | Next 10,00,000 | 30% * | Next 1,250,000 | 30% * |
| (e) Additional Tax | Remaining above 2,000,000 | 36% * | Remaining above 2,000,000 | 36% * |
*This is the Social Security Tax to be deposited in a separate revenue account (11211) provided for this purpose. However, taxpayers registered as sole proprietorship or on pension income or on income from contribution based pension funds shall not attract social security tax i.e. 1%. And if the taxpayer is depositing an amount in the Social Security Fund (SSF) then for those taxpayers Social Security Tax is not applicable. ** 36 % is computed as 30% plus additional 20% on such tax rate applicable to taxable income above Rs 2,000,000. To calculate your tax liability add all the personal incomes and check for the slabs to find out rates. For example if you are unmarried and you earn Nrs 8,50,000 per year, your tax is calculated as:
5,00,000*1%=Rs 5000 Plus
2,00,000*10%= Rs. 20000 Plus
1,50,000*20%= Rs 30000
Total Tax= 50,00+20,000+30,000= Nrs . 55,000
Some important notes related to Income Tax rules for resident natural persons.
| A. Deductions in Income | Remarks |
|---|---|
| A natural person working in remote areas entitled to remote area allowance | Additional deduction from taxable amount up to Rs 50,000. (a-50,000, b-40,000, c- 30,000, d-20,000, e-10,000). |
| A natural person with pension income is included in the taxable income. | An additional deduction equal to 25% of the amount prescribed under the first tax band or actual pension receipts, whichever is lower shall be allowed from taxable income. (Note: This provision was removed by Finance Act 2077 and have been reintroduced by Finance Ordinance 2078. |
| Incapacitated natural person | Additional deduction from the taxable amount equal to 50% of the amount prescribed under the first tax band or actual income whichever is lower. |
| B. Reduction on Income | Remarks |
|---|---|
| Life insurance premium | A natural person who has procured life insurance and paid premium amount thereon shall be entitled to a reduction of the actual annual insurance premium or rs 25,000 whichever is lower from taxable income. |
| Medical insurance | A natural person who has insured with a resident insurer/insurance company for health insurance shall be entitled to a reduction of the actual premium paid or rs 20,000 whichever is lower |
| Insurance of private building (new provision introduced by finance ordinance 2078) | A resident natural person who has insured private building in his/her ownership with resident insurer/insurance company shall be entitled to a deduction of the actual annual premium paid for such insurance or rs 5,000 whichever is lower. |
| Contribution to approved retirement fund | In case of contribution to Social Security Fund (SSF)- 1/3rd of taxable income or Rs 500,000 or Actual contribution whichever is lower.In case of contribution to other approved retirement funds but not in SSF- 1/3rd of taxable income or Rs 300,000 or Actual contribution whichever is lower |
| C. Foreign Allowances | Remarks |
|---|---|
| In the case of the employee employed at the foreign diplomatic mission of Nepal | Only 25% of the foreign allowances are to be included in the income from employment. |
| D. Tax Exemption | Remarks |
|---|---|
| The compensation received against a deceased natural person | The compensation received against the deceased a natural person is not required to be included in income. |
– A natural person with only gains from the disposal of Non-Business Chargeable Assets (NBCA), may opt not to file the income tax return under Section 96.
– Natural person is other than a sole proprietor with income solely from income from vehicle on hire not required to file the income tax return.
– However, a natural person having taxable income exceeding Rs 4 million during an Income Year shall submit income return under Section 96.
Income tax is applicable for Corporations. To calculate the corporate income tax you need to find out the profit after deducting all the allowable expenses and deductibles from the gross profit. Below is the chart of corporate income tax in Nepal for FY 2077/78 (2020-21).
| Source of Income | Tax Rate |
|---|---|
| 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% |
*This is the Social Security Tax to be deposited in a separate revenue account (11211) provided for this purpose. However, tax payer registered as sole proprietorship or on pension income or on income from contribution based pension fund shall not attract social security tax i.e. 1%. And if the taxpayer is depositing amount in the Social Security Fund (SST) then for those taxpayer Social Security Tax is not applicable
By Finance Act 2019-20, tax rates of special industry, entities involved in the operation business of road, bridge, tunnel, ropeway, railway, or sky bridge; operation of trolleybus and tram; export business, construction of infrastructures and construction, production, and distribution of electricity has been removed from the Schedule -1 of the Income Tax Act, 2058. Normal tax rate applicable to the above entities is 25%. However, these entities can avail various concessions given under Section 11 of the Act.