Section 11 Tax Concession:

General Principle of Tax Concession & Exemption:

 Dual tax concession facilities is not available for same income (taxpayer shall opt only one
concession which is beneficial to him). [One income one benefit]
 If tax concession is available only to particular transaction/business/particular area,
separate taxable profit/loss shall be computed for each of them.
Following are the concession provided by the ITA 2058 through Section 11
(1) Agriculture Income: – No Tax [Section 11(1)]
(including rental income from talent using land for producing agricultural product)
Exception: No exemption for agriculture income:
 Derived by proprietor/partnership firm, company or any corporate body.
 Derived from land beyond prescribed threshold.
Agriculture income derived by above entity is taxed as special industry (as it meets
definition of special industry)
(2) Following income of co-operative: – No Tax [Section 11(2 & 2A)]
 Income derived from agriculture & forest products (if such is produced by using
machineries, then such is taxable)
 Income of saving & credit Co-operative situated in Rural Municipality,

Definition of Special Industry

 It includes all [Manufacturing/production, Agro & Forestry & Mineral] based
industries u/s 15(2) of IEA 2076 except Industries Producing:
 Cigarette, Bidi, Cigar, Chewing tobacco, Gutka, Paan masala or similar product
having tobacco as a basic raw material.
 Alcohol, Beer or Similar Other products.
 Manufacturing Industries: Industries which produce goods by utilizing raw
materials, semi-processed raw materials or un-used products.
 Mineral Industries: The industry extracting & processing the metallic and non-
metallic material.
 Agro & Forestry industries: It includes tea & coffee (production & processing),
Fruits (production & Processing), dairy industry etc.
 Special industry does not cover industries related to electricity, petroleum, fuel,
tourism, IT, BOOT, Infrastructure (road, bridge etc.), health institution.
(3) Following are the additional concession for Special Industry:
If Special Industry Established in Concession
 SEZ situated in Himali & prescribed No tax for 1st 10 year
hilly district Thereafter, 50% concession
 SEZ situated in Other District No tax for 1st 5 year
Thereafter, 50% concession
 Industrial Area 25% concession for 1st 5 year of operation.
 Operated in Very-undeveloped, 90%, 80%, 70% for 1st 10 year
Undeveloped & low developed area Not available if it is operated by using
property of existing similar industry

If Special Industry is Concession

 Micro industries No tax for 1st 7 year & no tax for additional 3
years if operated by female
 Minerals Industry starting commercial No tax for 1st 7 year & 50% concession for 3
operation upto 2080: year thereafter
 Tea, Dairy & Garments Industry 50% concession on income generated
 listed Manufacturing industry 15% concession for all time

(4) Special Industry: Capital & Employment based

New Established Industry
(a) Established with more than 1 Arab
Capital, &
(b) Direct employment to 500 or more
person in whole year (any person)
Concession:
- No tax for 1st 5 year (from date of
commencing transaction)
- Next 3 year – 50% concession
Existing Established Industry
(a) Increased existing capacity by 25%,
(b) Capital increased to 2 Arab or more,
(c) Direct employment 300 or more person in
whole year (any person)
Concession:
- No tax for 1st 5 year
- Next 3 year – 50% concession
(on income generated from Increased
Capacity)

(5) Special Industry (Employment based):

Direct employment to Nepali during whole year as follows:
Employees Concession Additional Concession
100 or more 10% on rate If 1/3rd of such employees are female,
300 or more 20% on rate dalit, or incapacited – additional 10%
500 or more 25% on rate concession on such
1000 or more 30% on rate
(6) Export Business based concession: [Section 11(3 ङ, 3 झ, 3 ञ)]
 If resident NP – Concession of 25% for 20% rate & 50% for 30% rate
 If entity – 20% concession [concession on export income only]
 If manufacturing industry, additional 25% concession after above -
manufacturing industry may be special or others (i.e. liquor related).
(7) Conversion into Public company based: [section 11(3 ड)]
 Conversion of private company (special industry) (having 50 crore or more capital)
into public company
 10% concession for 3 year from conversion date
 Applicable only for voluntary conversion (not applicable if company is required to be
public company u/s 12 of company act)