Part

Changes in Income Tax

1 Finance Act 2080

1 Adjusted Taxable Income

Section 2(aad1)

Adjusted Taxable Income (ATI) is to be computed without reducing amount u/s 12A, 12B and 12C also.

Old Provision New Provision

Means the taxable income of any person for any income Means the taxable income of any person for any income
year calculated without reducing any amount under Section year calculated without reducing any amount under
12 or without any deduction under sub-section (2) of Section Section 12, 12A, 12B and 12C or without any deduction
14, Section 17 or 18. under sub-section (2) of Section 14, Section 17 or 18.

2 Turnover Based Taxation

Section 4(4A)

Section 4(4A) is now applicable for person having annual turnover equal to one crore also.

Old Provision New Provision

Notwithstanding section 4(2), the tax payable by a resident
natural person under Section 3(a) On the basis of turnover
in an income year Shall be equal to the amount calculated
according to the rate mentioned In Section 1(17) of Schedule
1 if s/he meets the following conditions:
Notwithstanding section 4(2), the tax payable by a resident
natural person under Section 3(a) On the basis of turnover
in an income year Shall be equal to the amount calculated
according to the rate mentioned In Section 1(17) of
Schedule 1 if s/he meets the following conditions:

a. The income of the individual for the income year consists a. The income of the individual for the income year
exclusively of the income from business having a source in consists exclusively of the income from business having
Nepal; a source in Nepal;

b. The taxable income from business is up to Rs Ten lakh b. The taxable income from business is up to Rs Ten lakh
and the annual turnover of the business is more than Rs and the annual turnover of the business is more than Rs
30,00,000 but less than Rs 1,00,00,000; 30,00,000 but doesn’t exceed Rs 1,00,00,000;

c. Is not having income from consultancy and expert c. Is not having income from consultancy and expert
services to be provided by individual including doctor, services to be provided by individual including doctor,
engineer, auditor, sports person, legal professional, artist, engineer, auditor, sports person, legal professional, artist,
consultant. consultant

|| CA Manish Adhikari|| 1
 3 Exemption to Educational Institutions
Section 10(m):

Educational institution has to make agreement with GON for availing exemption

Old Provision New Provision

Income earned as per its objectives by Educational
Institute established with the objective of not for
earning and distributing profit as per the agreement with
Government of Nepal (GON) or concerned entity of GON
is exempt from Income Tax.
Income earned as per its objectives by Educational
Institute established with the objective of not for
earning and distributing profit as per the agreement with
Government of Nepal (GON) or concerned entity of GON
is exempt from Income Tax.

4 Exemption to Agriculture income

Section 11(1)

Agriculture income earned by a firm, Company, Partnership or corporate body, is exempt @ 50% only.

Old Provision New Provision

1. Agricultural incomes, 1. Agricultural incomes,
except except
- those made through agriculture related Business - those made through agriculture related Business
conducted after registration as a firm, Company, conducted after registration as a firm, Company,
Partnership or corporate body, Partnership or corporate body,
or or
- through the land above the holding ceiling as prescribed - through the land above the holding ceiling as prescribed
in the Land Act, 2021, in the Land Act, 2021,
shall be exempt from tax. shall be exempt from tax.
Provided, Provided,
if any income is earned by carrying on agricultural if any income is earned by carrying on agricultural
business business
or cold storage business or dehydrating vegetables or cold storage business or dehydrating vegetables
by being registered as any firm, company, partnership by being registered as any firm, company, partnership
firm and other corporate body, firm and other corporate body,
100% tax on applicable income tax shall be exempted 100% 50% tax on applicable income tax shall be exempted

5 Concession to special Industry

Section 11(2b)(c)

There is no effect of the amendment under this section as it’s compensated by the amendment u/s 11(5)

Old Provision New Provision

a person having enjoyed the facility under clause (a) or (b) deleted
of section 11(2b) shall also be entitled to such exemption
and facility if the person is eligible to enjoy another tax
exemption facility under this Section.

|| CA Manish Adhikari|| 2
 6 Exemption to Hydropower Industry
Section 11(3d)(a)
Lower coastal hydro power project having tandem operation with the hydropower fulfilling some requirements shall also
be eligible for higher concession.
Old Provision
The licensed person or entity commencing commercial
production, transmission or distribution of hydropower,
electricity produced from solar, wind and biological
substance till Chaitra of 2084 shall be provided full income
tax exemption for the first 10 years and 50% exemption
for another 5 years afterwards
Provided that
in the case of the hydropower projects of more than 40
MW capacity with reservoir and semi reservoir concluding
financial closure till the month of Chaitra of 2085, shall
avail full tax exemption for first 15 years and 50% tax
exemption for further 6 years.
7 Concession on Income from export
Section 11(3e)(C):
Additional concession of 50% on export income is deleted. However, 50% concession for export of IT based services.
Old Provision
additional 50% of the tax on income earned from the
export of goods produced in Nepal after deduction of the
exemption under clause (a) or (b).
8 Concession to special industry
Section 11(5)
There is no effect of the amendment under this section as it’s compensated by the amendment u/s 11(2b).
Old Provision
In case a person is entitled to more than one concession
on a single income under this section, such person shall
get only one concession chosen by him.
|| CA Manish Adhikari||
New Provision
The licensed person or entity commencing commercial
production, transmission or distribution of hydropower,
electricity produced from solar, wind and biological
substance till Chaitra of 2084 shall be provided full income
tax exemption for the first 10 years and 50% exemption
for another 5 years afterwards
Provided that
in the case of the hydropower projects of more than 40
MW capacity with reservoir and semi reservoir concluding
financial closure till the month of Chaitra of 2085, and low
coastal hydropower project having tandem operation with
such hydro power project shall avail full tax exemption for
first 15 years and 50% tax exemption for further 6 years.
New Provision
50% of tax on income earned in foreign currency by
exporting services based on information technology such
as business process outsourcing, software programming,
cloud computing up to FY 2084/85.
New Provision
In case a person is entitled to more than one concession
on a single income under this section, such person shall
get only one concession chosen by him in addition to the
concession available under sub section 2b.
3
 9 Accounting for Employment income
Section 22(2):
Accrual basis is to be followed for employment income received, after settlement of cases of previous years.
Old Provision
While calculating the income from employment or
investment of a natural person accounts shall be kept in
cash basis for the purpose of tax.
10 TDS on Transportation
Provisio (8) to Section 88(1)
TDS@ 1.5% on transport services or rental of transport vehicles if the service provider is registered in VAT.
Old Provision
In a payment for carriage service or rent payment for
carriage service, tax shall be withheld @ 2.5% In a payment
for carriage service or rent payment for carriage service,
tax shall be withheld @ 2.5%
11 TDS on interest paid by hydropower
Provisio (9A) to Section 88(1
TDS@ 5% on interest paid by specific hydropower projects on foreign currency loan taken from foreign BFIs.
Old Provision [Sec. 88(4)(b2)]
No tax shall be withheld on interest payment by a
hydropower projects of more than 200 MW capacity with
reservoir and semi reservoir concluding financial closure
till the month of Chaitra of 2082 on foreign currency loan
from foreign bank and financial institutions.
|| CA Manish Adhikari||
New Provision
While calculating the income from employment or
investment of a natural person accounts shall be kept in
cash basis for the purpose of tax.
However, accounts shall be maintained in accrual basis
in concerned income year if the natural person receives a
lump sum amount as income from employment related to
previous years after the court’s final decision of the case
New Provision
In a payment for carriage service or rent payment for
carriage service, tax shall be withheld @ 2.5%
However, tax shall be withheld @ 1.5% while making
payment to a person for providing
➢ transport services or
➢ rental of transport vehicle
if the service provider is registered in VAT.
New Provision
Tax shall be withheld @ 5% on interest payment by a
hydropower projects of more than 200 MW capacity with
reservoir and semi reservoir concluding financial closure
till the month of Chaitra of 2082 on foreign currency loan
from foreign bank and financial institutions.
4
 12 TDS on interest paid to Natural person
Section 88(3):
TDS@ 6% on interest paid by resident BFIs, co-operatives to Natural person (other than for business purpose.)
Old Provision
In making payment to any individual of interest or of an
amount in the form of interest as follows, in consideration
for deposits, bonds, debentures an government bonds,
a resident bank, financial institution, cooperative
organization or any other body issuing bonds or company
enlisted under the prevailing law shall withhold tax @5%
of the total amount of payment:
(a) Which has source in Nepal, and
(b) Which is not related with the operation of business.
13 TDS on import of arms & ammunition
Section 89(3)
TDS@ 5% on import of arms, ammunition, explosives by Nepal army, police or APF.
Old Provision
Where the Department has given that resident person a
notice in writing except as referred to in clause (a) or (b),
at the rate specified in the notice.
Provided that this Sub- section shall not be applicable
in the payment for purchase of arms, ammunition,
explosives and communication equipment purchased
by Nepal Army, Nepal Police and Armed Police for their
purpose _
|| CA Manish Adhikari||
New Provision
In making payment to any individual of interest or of an
amount in the form of interest as follows, in consideration
for deposits, bonds, debentures an government bonds,
a resident bank, financial institution, cooperative
organization or any other body issuing bonds or company
enlisted under the prevailing law shall withhold tax @5%
@6% of the total amount of payment:
(a) Which has source in Nepal, and
(b) Which is not related with the operation of business.
New Provision
Where the Department has given that resident person a
notice in writing except as referred to in clause (a) or (b),
at the rate specified in the notice.
Provided that this Sub- section shall not be applicable
in the payment for purchase of arms, ammunition,
explosives and communication equipment purchased
by Nepal Army, Nepal Police and Armed Police for their
purpose _
5
 15 Collection of Advance Tax
Section 95A
Advance tax shall be collected by resident BFIs or money transfer @ 5%.
Old Provision
6B. Any individual resident not involved in the operation
of business receiving payment in foreign currency for
providing software or similar kind of other electronic
service outside Nepal, the concerned bank, financial
institution or money transfer institution shall collect
advance tax @1% of the amount received at the time of
payment of such amount.
6c. Any individual resident not involved in the operation
of business receiving payment in foreign currency
for providing consultancy service outside Nepal, the
concerned bank, financial institution or money transfer
institution shall collect advance tax @1% of the amount
received at the time of payment of such amount.
6d. Any individual resident not involved in the operation
of business receiving payment in foreign currency for
uploading audio- visual material in social network, the
concerned bank, financial institution or money transfer
institution shall collect advance tax @1% of the amount
received at the time of payment of such amount.
16 Collection of Advance Tax
Section 95A (6E)
Advance tax @1% to be collected by e-commerce operator.
Old Provision
|| CA Manish Adhikari||
New Provision
6B. Any individual resident not involved in the operation
of business receiving payment in foreign currency for
providing software or similar kind of other electronic
service outside Nepal, the concerned bank, financial
institution or money transfer institution shall collect
advance tax @1% @5% of the amount received at the
time of payment of such amount.
6c. Any individual resident not involved in the operation
of business receiving payment in foreign currency
for providing consultancy service outside Nepal, the
concerned bank, financial institution or money transfer
institution shall collect advance tax @1% @5% of the
amount received at the time of payment of such amount.
6d. Any individual resident not involved in the operation
of business receiving payment in foreign currency for
uploading audio- visual material in social network, the
concerned bank, financial institution or money transfer
institution shall collect advance tax @1% @5% of the
amount received at the time of payment of such amount.
New Provision
In case a person sells goods, services or goods and
services through the E-commerce platform, the resident
Ecommerce operator shall deduct advance tax at the
rate of 1% at the time of payment against sale of goods,
services or good and services.
6
 17 Advance tax collection on import
Section 95A (7)

Advance tax @1.5% on import of certain VAT attractive goods.

Old Provision New Provision

Tax shall be Collected at the customs point if imported for
business purpose
@ 5%
• ox, buffalo, goat, sheep, mountain goat under Chapter 1
of the Custom Classification,
• live, fresh and frozen fish under Chapter 3,
• fresh flowers under Chapter 6,
• fresh vegetables, potato, onion, dry vegetables, garlic,
baby corn under Chapter 7
• fresh fruits under Chapter 8
@ 2.5%
• meat under Chapter 2,
• milk products, eggs, honey under Chapter 4
• barley, millet, sorghum (Junelo), rice, beaten rice under
Chapter 10,
• refined wheat flour, wheat flour under Chapter 11,
• herbal medicines, sugarcane under Chapter 12 and
• vegetation products under Chapter 14,
Tax shall be Collected at the customs point if imported for
business purpose
@ 5%
• ox, buffalo, goat, sheep, mountain goat under Chapter 1
of the Custom Classification,
• live, fresh and frozen fish under Chapter 3,
• fresh flowers under Chapter 6,
• fresh vegetables, potato, onion, dry vegetables, garlic,
baby corn under Chapter 7
• fresh fruits under Chapter 8
@ 2.5%
• meat under Chapter 2,
• milk products, eggs, honey under Chapter 4,
• barley, millet, sorghum (Junelo), rice, beaten rice under
Chapter 10,
• refined wheat flour, wheat flour under Chapter 11,
• herbal medicines, sugarcane under Chapter 12 and
• vegetation products under Chapter 14
However, advance tax shall be collected @ 1.5% in case of
import of VAT attractive goods.

18 Slab rate for Natural Person

Section 1(1) of schedule 1

Tax @ 39% for natural person for income > 50 lakhs.

Old Provision New Provision

For Single natural person For Single natural person
First 5 lakh @ 1%/0% First 5 lakh @ 1%/0%
Next 2 lakh @ 10% Next 2 lakh @ 10%
Next 3 lakh @ 20% Next 3 lakh @ 20%
Next 10 lakh @ 30% Next 10 lakh @ 30%
Balance @ 36% Next 30 lakh @ 36%
Balance @ 39%
For Couple
First 6 lakh @ 1%/0% For Couple
Next 2 lakh @ 10% First 6 lakh @ 1%/0%
Next 3 lakh @ 20% Next 2 lakh @ 10%
Next 9 lakh @ 30% Next 3 lakh @ 20%
Balance @ 36% Next 9 lakh @ 30%
Next 30 lakh @ 36%
Balance @ 39%
|| CA Manish Adhikari|| 7
 19 Tax rate for natural person
Section 1(4A) of schedule 1

Old Provision New Provision

Notwithstanding anything contained elsewhere in this
section, tax shall be levied @ 1% on income pursuant
to sub-section (6B), (6C) and (6D) of section 95A of a
resident natural person
not engaged in business.
Notwithstanding anything contained elsewhere in this
section, tax shall be levied @ 1% 5% on income pursuant
to sub-section (6B), (6C) and (6D) of section 95A of a
resident natural person not engaged in business.

20 Taxation on owner of vehicles on hire

Section 1(13) of Schedule 1

An annual tax as follows shall be collected from the owners of vehicles on hire through the Transportation Management
Office at the time of registration or renewal of vehicle.

Particular Old Provision New Provision

1. Car, jeep, van, micro-bus:

a.Up to 1,300 cc 4,000 5,500

b. 1,301 to 2,000 cc 4,500 6,000
c. 2,001 to 2,900 cc 5,000 6,500
d. 2,901 to 4,000 cc 6,000 8,000
e. More than 4,000 cc 7,000 9,000
2. Mini-truck, mini-bus, water tanker 6,000 8,000
3. Mini-tripper 7,000 9,000
4. Truck, Bus 8,000 10,500
5. Machinery apparatus like dozer, ex-cavator, 12,000 15,500
loader, roller, crane
6. Oil tanker, gas bullet, tripper 12,000 15,500
7. Tractor 2,000 2,500
8. Power tiller 1,500 2,000
9. Auto-rickshaw, three-wheeler, tempo 2,000 2,500
10. Electric Vehicles
a. Up to 50 KW 3,000
b. 50 KW -125 KW 4,000
c. 125 KW- 200 KW 6,000
d. More than 200 KW 7,500

|| CA Manish Adhikari|| 8
 21 Tax rate for entity
Section 2(2) of schedule 1
Old Provision
Tax shall be levied @ 30% on following entities:-
• Bank and Financial Institution
• General Insurance Business
• Telecommunication and Internet service Provider
• Money Transfer
• Capital Market Business, Securities business, Merchant
banking business, Commodity future market
• Securities market broker business
• Person conducting transactions of cigarette, bidi, cigar,
chewing tobacco, powder tobacco, gutkha, panmasala,
liquor, beer or
• Person conducting transactions of petroleum works
22 Tax rate for co-operatives
Section 2(3) of schedule 1
Old Provision
Cooperative registered under Cooperative Act, 2074 on
transactions other than tax exempt transactions
• If operated in municipality area 5%
• If operated in sub-metropolitan and 7.5%
• If Operated in metropolitan area 10%
|| CA Manish Adhikari||
New Provision
Tax shall be levied @ 30% on following
entities:-
• Bank and Financial Institution
• General Insurance Business
• Entity engaged in financial transactions
• Telecommunication and Internet service Provider
• Money Transfer
• Capital Market Business, Securities business, Merchant
banking business, Commodity future market
• Securities market broker business
• Person conducting transactions of cigarette, bidi, cigar,
chewing tobacco, powder tobacco, gutkha, panmasala,
liquor, beer or
• Person conducting transactions of petroleum
works
New Provision
Cooperative registered under Cooperative Act, 2074 on
transactions other than tax exempt transactions:
• If operated in municipality area 5%
• If operated in sub-metropolitan and 7.5%
• If operated in metropolitan area 10%
However, tax shall be levied as below t0 cooperatives
engaged in savings and credit related transactions:
• If operated in municipality area, 10%
• If operated in sub-metropolitan and 15%
• If 0perated in metropolitan area 20%
9
 Part
Amendment in VAT Act and Rules
2 For FY 2079-80

1 Reverse charge on Transportation

Section 8(2A)

Reverse Charge applicable if transportation service is received from unregistered person.

Old Provision New Provision

If any registered or unregistered person receives
goods transportation service from unregistered person
then tax shall be assessed and collected on taxable value
at the time of payment or receipt
of service whichever is earlier.

2 Credit of reverse VAT

Section 17(5B)

Credit of VAT paid under reverse charge basis u/s 8(2A) is allowed.

Old Provision New Provision

Credit allowed for section 8(2), section 12A and section Credit allowed for section 8(2), section 8(2A) section 12A
15(3) and section 15(3)

3 Concession on additional charge

Section 19(4)

Old Provision New Provision

If a taxpayer submits an application to the Director
General for the exemption of additional charges imposed
by subsection (2)
stating the reason that the failure to make payment
was caused by extraordinary circumstances beyond the
taxpayer’s control, The DG may, if he finds the reason
reasonable, exempt such charges.
If a taxpayer submits an application to the Director
General for the exemption of additional Charges charge
imposed by subsection (2) stating the reason that the
failure to make payment was caused by extraordinary
circumstances beyond the taxpayer’s control, The DG may,
if he finds the reason reasonable, exempt such charges.

|| CA Manish Adhikari|| 10
 4 Incentive for E-payment
Section 25(1B)
Incentive for payment through electronic medium is now available only for prescribed goods and services.
Old Provision
If a consumer makes payment of the goods or services
purchased via electronic medium in accordance to the
prevailing laws, then the ten percent of the tax amount
paid shall be refunded as cash incentive and deposited in
their bank account as per the procedure prescribed by the
Department
5 Re-import of exported goods
Section 28(1A)
Old Provision
If any goods manufactured or prepared in Nepal, after
completion of export procedure or after reaching foreign
country, are reimported due to rejection by party or any
other reasons and same goods are to be exported within
3 months of import, goods can be brought in Nepal by
depositing amount equal to VAT and such deposit shall
be refunded after re-export of such goods. The Custom
office shall provide the details of deposit and refund of
such deposits to Inland Revenue Office.
6 Penalty on refund taken wrongly
Section 29(1E)
If refund under clause (a), (a1) and (a2) of section 25(1) is taken wrongly, 25% of tax will be charged as penalty.
Old Provision
|| CA Manish Adhikari||
New Provision
If a consumer makes payment of the goods or services
assessed by department by publishing the notice
purchased via electronic medium in accordance to the
prevailing laws, then the ten percent of the tax amount
paid shall be refunded as cash incentive and deposited in
their bank account as per the procedure prescribed by the
Department
New Provision
If any goods manufactured or prepared in Nepal, after
completion of export procedure or after reaching foreign
country, are reimported due to rejection by party or any
other reasons and same goods are to be exported within
3 months of import, goods can be brought in Nepal by
depositing amount equal to VAT and such deposit shall
be refunded after re-export of such goods. The Custom
office shall provide the details of deposit and refund of
such deposits to Inland Revenue Office. Department.
New Provision
If any refund under clause (a), (a1) and (a2) of Section
25(1) has been taken of which refund was not allowed,
Tax Officer can charge penalty of 25% of tax amount.
11
 7 VAT exemption to small vendor
Rule 6(1)
Turnover limit of 50 lakhs in case of Transportation service and rental of transport vehicles for
Registration exemption.
Old Provision
Notwithstanding anything contained in Rule 3,
any person who has carried on transaction with a turnover
not exceeding Rs 50 lakhs in goods only or Rs 20 lakhs in
service or both
service & goods in the last 12 months as mentioned in
section 9 of the Act, is not required to get his transaction
registered.
8 Transactions to be registered
Rule 7(1)
Turnover limit of 50 lakhs in case of Transportation service and rental of transport vehicles for
Registration exemption.
Old Provision
If any person has any ground to presume that his annual
transaction in goods may exceed 50 lakhs rupees or
in service or both goods & services, he has to make an
application setting out such ground in the format referred
to in Schedule -1, to the concerned Tax Officer to get the
transactions registered.
9 Temporary registration(fair, exhibition)
Rule 7A
Old Provision
|| CA Manish Adhikari||
New Provision
Notwithstanding anything contained in Rule 3,
any person who has carried on transaction with a turnover
not exceeding Rs 50 lakhs in goods, Renting of transport
vehicles or transportation service only or Rs 20 lakhs in
service or both service & goods in the last 12 months as
mentioned in section 9 of the Act, is not required to get his
transaction registered.
New Provision
If any person has any ground to presume that his annual
transaction in goods, Renting of transport vehicles or
transportation service only or Rs 20 lakhs may exceed 50
lakhs rupees or in service or both goods & services, he
has to make an application setting out such ground in the
format referred to in Schedule -1, to the concerned Tax
Officer to get the transactions registered
New Provision
5. The Tax Officer, after receiving application under sub-
rule (4), shall, after checking returns and documents
submitted by taxpayer, cancel temporary registration
within 15 days and inform to the applicant.
6. Deposit under sub-rule(2) can be adjusted with the VAT
payable under sub-rule (4) by the applicant.
7. If additional tax is assessed after examining under sub-
rule (5), applicant shall be provided notice of 3 days for
payment of tax. If tax is not paid by applicant within such
time, tax shall be
recovered from his deposits and if still remaining, shall be
recovered from the organizer.
12
 10 Place of supply for electronic services
Rule 10A

Old Provision New Provision

Notwithstanding anything contained elsewhere in the rules,
place of supply is said to be in Nepal if any of the following
conditions are satisfied:
f. Service is received using sim card or landline telephone
having code of Nepal.
Notwithstanding anything contained elsewhere in the rules,
place of supply is said to be in Nepal if any of the following
conditions are satisfied:
f. Service is received using sim card or landline telephone
having code of Nepal.

11 Tax period
Rule 26(3B)

a. Brick Industry, Hotel, Tourism, cinema halls are not allowed to file return on 4 month basis.
b. Taxpayer with annual transaction upto 1 crore rupees can opt for filing return on 4 month basis.

Old Provision New Provision

If Brick Industry, Printing, Printing and Electronic publishing
and transmission house, Hotel, Tourism entrepreneurs,
cinema halls, opts, Department shall allow Tax period of 4
months for filing return.
If Brick Industry, Printing, Printing and Electronic publishing
and transmission house, Hotel, Tourism entrepreneurs,
cinema halls, and taxpayer whose annual transaction is
upto 1 Crore rupees, opts for filing return,opts, Department
shall allow Tax period of 4 months for filing return.

12 Automatic refund
Rule 45(4)

Refund process made easier in case of section 25(1) (a), 25(1), (a1) & 25(1) (a2).

Old Provision New Provision

Refund of tax as per clause (a), (a1) & (a2) of sub section
1 of section 25 shall be done on automated electronic
method. The procedures shall be as prescribed by
Department.

|| CA Manish Adhikari|| 13