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

 B) Employed Couple (Married Couple)

• Non-Residents

2) Corporate Income Tax

•  For Entities – Company/Firm/Industry

• Tax Concessions-1

• Tax Concessions-2

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

b) Electric Vehicles

c) Car, Jeep, Van, and MicroBus

5) Excise Duty

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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The post Nepal Income Tax Slab Rates for FY 2077-78 B.S. (2020-21) appeared first on Nepali Sansar.

The Nepal Government is back with its new tax rates and slabs for the new fiscal 2076-77 (2019-20) that began in April 2019.

The Finance minister Yubaraj Khatiwada presented Nepal’s Annual Budget for FY 2076-77 on May 29, 2019.

The NPR 1.53 trillion budget covered all the sectors with key focus on developmental reforms that will improve living standards through effective implementation and safeguarding of citizens’ fundamental rights.

Besides sector-wise spending, the new budget displayed a 14 percent rise over the previous year’s budget and dedicated NPR 957 billion (62%) to the recurrent expenditure, followed by NPR 408 billion (27%) to capital expenditure and NPR 167 billion (12%) for provisioning finance for principal payment of loans.

Towards adding to the government’s treasury, the new budget is looking at NPR 981 billion (64%) revenue collection, NPR 58 billion from foreign grants, NPR 298 billion from foreign loans, NPR 195 billion from domestic loans.

Overall, the government announces an estimated GDP of 8.5 percent and inflation rate of 6.5 percent.

Given the role that taxpayers play in government’s revenue earnings, Nepal Budget 2076-77 has some important announcements for its citizens, businesses, corporate entities and overseas players willing to business in Nepal, and more.

Income Tax Rates in Nepal FY 2076/77 (Video)

Highlights of Key Tax Announcements from the Federal Budget 2076-77 (2019-20):

1) Tax Rates: Direct Tax

 1.1 Individual/Natural Person

 1.2 Couple

• Payments of salaries and wages to workers/employees without PAN is inadmissible expense
• Provision of revised return has been introduced within 30 days of submission of tax return
• Expenses booked on invoices without PAN Invoice above RS 1000 is inadmissible expense
• Strict implementation of ‘One man One PAN’ policy
• Investment in share is encouraged by cutting down applicable tax rate (for individual/natural person) from 7.5% to 5%, and the calculation of gain will depend on weighted average cost
• Letter of Intent to be submitted before 2077 Ashad end to get income tax facility and exemption on merger of bank and financial institution and insurance companies
• Tax benefits and exemptions available under section 11 has been synchronized with rebates and concessions available under other laws
• Husband and Wife with separate income sources can prefer the assessment as joint (as married family) or separately.

2) Tax Rates: Indirect Tax

• Goods transportation has been brought under ambit of VAT w.e.f from 15^th Jestha 2076 (May 29, 2019)
• VAT refund can be claimed in case of continuous VAT credit/ receivable for 4months (Previously 6 months)
• Bonded warehouse facility extended for import of all types of raw materials for producers exporting more than 20% (Earlier 50%)
• Exemption of 50% customs on import of vehicle by agro-based co-operative 1% custom rate for import of Mill machinery, spare parts and chemicals for self-utilization by textile industries.
• Import of water transport vehicle, vessel etc. is subject to 5% custom rate instead of 15%
• Nepalese national are allowed to bring upto100gms of gold while returning from foreign countries by paying applicable custom.
• 10% of the VAT of the related invoice will be deposited directly into bank account of buyer on purchase of goods or services through card or online mechanism.
• VAT refund to person and entity enjoying diplomatic facilities can immediately be provided if they purchase goods and services from listed firms.
• VAT not applicable for accidental and health insurance

3) Tax Rates: Non-resident Person

• Nepal Government has a special tax treaty called Double Taxation Avoidance Agreement (DTDA) with 11 countries namely: India, Sri Lanka, Mauritius, Thailand, Qatar, Pakistan, Norway, Korea, Austria, China & Bangladesh, to avoid double taxation. This makes every Nepali taxpayer to enjoy the right to opt the provisions contained in either Nepal Income Tax Act, 2002 or Treaty, whichever is beneficial to them.

4) Tax Rates: Entities

5) Tax Concession and Rebates:

• Special Economic Zones (SEZ)

Industries established in Special Economic Zone (SEZ), situated in mountainous districts and hilly districts prescribed by Nepal Government, will get a tax exempt for the first 10 years and will later be subjected to 50% of the applicable tax rate. Whereas, industries in SEZ in other regions will get an exemption for only 5 years initially and later the same as above.

• Technology

50% tax rebate for ‘income from Foreign technology and management service fee and royalty of Foreign investor in SEZ will get tax exemption 50% of the applicable tax rate. IT industry established within IT Park, biotech park and technology park as specified in the Gazette’

• Entities

15% tax rebate for ‘Entities (Manufacturing, Tourism, Hydroelectricity production, distribution and transmission, IT industry established within IT Park, biotech park and technology park as specified in the Gazette) listed in Securities Market’.

• Mining

The person involved in exploration & extraction of petroleum and natural gases & mining and start operation within Chaitra end 2080, will tax exemption for the first 7 years and 50% of applicable rate on subsequent 3 years.

• Exports

Income earned by manufacturing industries through export sales and royalty income earned from export of intellectual assets will get 25% tax concession on the applicable rate.

• Special industry operating in underdeveloped regions will get tax concession 90% of the applicable tax rate, for the first 10 years, and 70% in case of partly developed regions. 

• Hydropower

Hydropower projects, solar energy projects, waste-to-energy and wind turbines projects, starting the commercial generation of electricity by Chaitra end 2080, will get tax exemption for first 10 years and 50% of the applicable tax rate thereafter for next 5 years.

• Transport Infrastructure

Income generated from operation of tram or trolley bus will get tax rebate- 20% of applicable tax rate; 40% is for the construction and operation of ropeway, cable car, railway and tunnel; 52% for the construction and operation of the airport, sky bridge, road, bridge and tunnel roads.

• Tourism and Airlines

Tourism Industry or International Airlines Operators with capital investment of NPR 2 Billion will get tax holiday for the first 5 years from the date of commencement of business and 50% tax exemption for additional 3 years. 

• PM Relief Fund

If any person contributing any amount to Prime Minister (PM) Relief Fund or National Reconstruction Fund (NRF) established by Government of Nepal during any Income Year, the amount will be allowed as deduction from the taxable income of the person during the Income Year.

• Public Infrastructure Projects

Construction & Operation of public infrastructure projects, required to be transferred to the government and construction, production and transmission of electricity house, will be allowed a concession of 20% tax of applicable tax rate.

The Income Tax, Education Service Tax, Vehicle Tax and other taxes mentioned under the Finance Act 2076 (2019) will come into the effect for the FY 2019-20 from Shrawan 2076 (i.e. July 17, 2019), whereas, Value Added Tax (VAT), Customs & Excise Duties, Health Service Tax and Infrastructure Tax provisions were scheduled to be effective immediately after announcement.

Related Article:-

• Nepal Federal Budget FY 2019-20: Highlights & Announcements
• Nepal Income Tax Slab Rates for FY 2075-76 B.S (2018-19)

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The Government rolled out the budgetary allocation for FY 2018-19 on May 29, 2018. With the aim to draw more funds to the government treasury, it has introduced a new income tax slab.

The new income tax distribution gives taxpayers between NPR 350,000 – 400,000 bandwidth some relief, with only a 10 percent tax rate. Previously taxpayers between the range had to pay 15 percent tax over their annual incomes.

Latest News:

• Nepal Budget FY 2020-21: Highlights and Key Announcements
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Furthermore, the previous 15 and 25 percent income tax rates have been replaced with 10, 20 and 30 percent tax rates, respectively.

The following tables present the income tax distribution as per individual, couples and non-resident Nepalis & couples:

1) Income Tax Rates of Nepal For Resident Persons

2)  Income Tax Rates for Couples

3) Income Tax Rates in Nepal For Non-Resident Persons

4) Income Tax Rates in Nepal For Non-Resident Couples

Additional income tax slabs for various sectors & industries across Nepal:

• The new policy has also increased excise duty on 150-250 cc two-wheelers from 10-70 percent
• Additionally, two-wheelers above 250 cc will have to pay from 20-80 percent
• Four-wheelers above 1,000-1,500 cc have been increased by five percent up to 56 percent
• The government has levied 25 paisa ‘health hazard tax’ on every unit of cigarette, bidi, and cigar
• Similarly, an additional Rs 25 per kg health hazard tax has been introduced for import or home-bound production of chewing tobacco
• Income tax on telecommunications services has been increased by 5 percent to 30 percent
• Special industries including tourist services, electricity production, manufacturing agriculture, mineral, forestry and distribution listed on Nepal Stock Exchange and industries listed as part of 11(3ga) will be entitled to a tax deduction of 15% on the applicable tax rate
• Persons working in remote areas are entitled to a tax deduction of up to a maximum of NPR 5,000 on taxable income

Income Tax Exemptions:

A. General Exemptions

The newly-introduced income tax policy doesn’t include the following:

• Income given and dividends shared by cooperatives in the agro-forestry industry
• Income received by normal persons through agriculture from land within ownership ceiling
• Income given and dividends shared by cooperatives under rural municipalities providing loan and savings services

B. Special Exemptions

• Special industries established with an investment of NPR 1 billion or more are excluded from the tax fold until five years from the date of establishment
• Additionally, if these industries are further excluded from the tax fold if they employ 500 employees or more during the year of establishment
• Special industries with an increased investment of up to NPR 1 billion after establishment are exempted from tax until 5 years from the date of increment of capital
• These industries are further excluded from the tax fold if they employ 500 employees or more during the year of the establishment until 5 years from the date of increment of capital
• Such industries will be exempted from tax if their increment amounts to 25% of installed capacity until five years from the date of capital increment
• Mining Petroleum & Natural Gas industries will be exempted from taxes on commencement of commercial operation by April 12, 2024, for 7 years from the date of commercial operation
• Energy-based industries will be exempted from taxes on commencement of commercial operation by April 12, 2014, for 10 years from the date of commercial operation
• Tourism-related industries with the commencement of operation by April 12, 2014, will be exempted from taxes until five years from the date of commercial operation
• Aviation industry established with an investment of more than NPR 2 billion & conducting international flights will be exempted from tax until five years from the date of commercial operations

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