Nepal Income Tax Slab Rates for FY 2077-78 B.S. (2020-21)

Finance Minister Yuba Raj Khatiwada presented the NPR 1.47 billion budget

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Nepal Income Tax Slab Rates for FY 2077-78 B.S. (2020-21)

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.

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

“Enhance the 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 the 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.

Video: New Income Tax Slab Rates in Nepal 2020-21

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

Nepal Income Tax Slab Rates 2077-78 (2020-21), Provisions and Concessions

For Individuals

1) Personal Tax

Residents: Natural Person

A) Employed Individuals

Income Level (NPR)	Tax Rate (FY 2020-21)	Taxable Amount
Up to 4 Lakh	1%	NPR 4,000
Additional 1 Lakh	10%	NPR 14,000
Additional 2 Lakhs	20%	NPR 54,000
Next 1,300,000	30%	NPR 444,000
Additional Tax: Above 2,000,000	36%	NPR 624,000

B) Employed Couple (Married Couple)

Income Level (NPR)	Tax (FY 2020-21)	Taxable Amount
Up to 450,000	1%	NPR 4,500
Additional 100,000	10%	NPR 14,500
Additional 200,000	20%	NPR 54,500
Next 1,300,000	30%	NPR 429,500
Additional Tax: Above 2,000,000	36%	NPR 609,500

Non-Residents

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 the 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 a 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%

Tax Concessions-1

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

Tax Concessions-2

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
Industries importing bulk and bitumen petroleum for their consumption will get 25% concession
Increase in customs duty on import of Spirits obtained by distilling grape wine or grape marc from NPR 1,200 to NPR 1,500 per liter
Reduction in customs duty on import of separator used in Agriculture factory from 5% to 1%
Reduction in customs duty on import of Balances of a sensitivity of 50 mg or better, with or without weights by Medical industry from 5% to 1%
Industry producing Surgical Mask will be levied 5% customs duty on import of unwoven textile under, elastic ropes, rustproof metal strips
Poultry Industry will get 50% rebate on custom duty for fertilized eggs for the production of chicks

3) Value-Added Tax (VAT)

13 percent discount on 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) Vehicle Tax Rate in Nepal FY 2020-21 (2077-78)

a) Motorcycle

CC	Tax Amount
Up to 125 cc	NPR 2,800
126 cc – 160 cc	NPR 4,500
161 cc – 250 cc	NPR 5,500
251 cc – 400 cc	NPR 9,000
401 cc – 650 cc	NPR 20,000
Above 651 cc	NPR 30,000

b) Electric Vehicles

CC	Tax Amount
350 Watt to 1000 Watt	NPR 1500
1001 watt to 1500 watt	NPR 2000
1501 watt and higher	NPR 3000

c) Car, Jeep, Van, and MicroBus

CC	Tax Amount
Up to 1000 cc	NPR 21,000
1001 cc – 1500 cc	NPR 23,500
1501 cc – 2000 cc	NPR 25,500
2001 cc – 2500 cc	NPR 35,500
2501 cc – 2900 cc	NPR 41,000
Above 2901 cc	NPR 58,500

5) Excise Duty

Goods	Excise Duty
Pan masala	NPR 650/kg
Flavored areca (supari) with tobacco	NPR 225/kg
Edible Fruit and Nuts; Peel of Citrus Fruit or Melons	5%
Tobacco and Manufactured Tobacco Substitutes	NPR 650/kg
Hukkah Flavor	NPR 1000/kg
Essential Oils and Retinoids; Perfumery, Cosmetic or Toilet Preparations-others	10%
Wire of iron or non-alloy steel	NPR 1650/MT

6) Other Key Taxes and Fees in Nepal

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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