Presenting the budget for FY 2075/76 B.S. the Nepal Government increased the income tax slab rates in accordance with the budget speech.
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.
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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
| Particulars |
New Tax Rate |
Taxable Amount (NPR) |
| First Tax Slab (3,50,000) |
1% |
3,500 |
| Next (Yearly income up to 4,50,000) |
10% |
3,500 + 10,000 = 13,500 |
| Next (Yearly income up to 6,50,000) |
20% |
13,500 + 40,000 = 53,500 |
| Next (Yearly income up to 20,00,000) |
30% |
53,500 + 405,000 = 458,500 |
| Yearly income 20,00,000 and Above |
36% |
Example:
If annual income is 2,500,000
Tax amount up to 2,000,000 = 458,500
Additional income of 500,000 =
Total tax on 500,000 = 180,000 (36%) |
2) Income Tax Rates for Couples
| Particulars |
New Tax Rate |
Taxable Amount (NPR) |
| First Tax Slab (Yearly income up to 4,00,000) |
1% |
4,000 |
| Next (Yearly income up to 5,00,000) |
10% |
4,000 + 10,000 = 14,000 |
| Next (Yearly income up to 7,00,000) |
20% |
14,000 + 40,000 = 54,000 |
| Next (Yearly income up to 20,00,000) |
30% |
54,000 + 390,000 = 444,000 |
| Yearly income 20,00,000 and Above |
36% |
Example:
If annual income is 2,500,000
Tax amount up to 2,000,000 = 444,000
Additional income of 500,000 =
Total tax on 500,000 = 180,000 (36%) |
3) Income Tax Rates in Nepal For Non-Resident Persons
| Particulars |
New Tax Rate |
Taxable Amount (NPR) |
| First Tax Slab |
1% |
350,000 |
| Next |
10% |
100,000 |
| Next |
20% |
200,000 |
| Next |
30% |
13,00,000 |
| Balance Exceeding |
36% |
20,00,000 |
4) Income Tax Rates in Nepal For Non-Resident Couples
| Particulars |
New Tax Rate |
Taxable Amount (NPR) |
| First Tax Slab |
1% |
400,000 |
| Next |
10% |
100,000 |
| Next |
20%
30% |
200,000
13,00,000
|
| Balance Exceeding |
36% |
20,00,000 |
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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