Nepal Budget Highlight 2074/75 (2017/18) Tax Rates

Nepal Budget Highlights
Fiscal Year 2074/75 (2017/18)
Presented By:
CA. Tika Karki
Mobile no: 9801080037/ 9851177626
Tel no: 01-4232213 Extn. 8007
Email id: tika.ccbs@gmail.com
Kandel & Associates
Chartered Accountants
4th
Floor, Madhavi Tower
Shanker Dev Campus Road
Putalisadak Kathmandu
Nepal
Tel no: 01-4232213
ꟾ Audit ꟾ Tax ꟾ Accounting ꟾ Business Consulting ꟾ

Nepal Budget Highlights FY 2074/75 (2017/18)
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Table of Contents
A. Budget Summary ..........................................................................................................................1
 Objectives of this budget.........................................................................................................1
 Source of Fund........................................................................................................................1
 Allocation of Budget...............................................................................................................1
 Policy and programs of revenue mobilization for Fiscal Year 2074/75 .................................2
 Policy and programs to achieve the objectives of revenue policy ..........................................2
 Major highlights of the budget................................................................................................4
 Economic Situation.................................................................................................................5
B. Reminders for tax payers .............................................................................................................5
 Type of return with due date...................................................................................................5
 Various important deadline.....................................................................................................5
 Fine and Penalties in case of defaults: ....................................................................................6
 Revenue Code:........................................................................................................................6
C. Income Tax ....................................................................................................................................8
1. Amendment in Income Tax Act...........................................................................................8
2. Tax rate applicable for FY 2074/75(2017/18) .....................................................................9
 Tax rate for Natural Resident Person:.....................................................................................9
 Deductions and facilities for Resident Persons:....................................................................10
 Rebate on tax liability for resident female with only employment income ..........................11
 Contribution to Approved Retirement Fund (ARF) - (Section 63).......................................11
 Tax credit for resident persons..............................................................................................11
 Tax rate for Non-Business Chargeable Assets (NBCA):......................................................12
 Tax rate for Non-Resident Person:........................................................................................12
 Presumptive Tax ...................................................................................................................12
 Turnover (Transaction based) Tax........................................................................................13
 Tax rate for entity..................................................................................................................14
 Tax Concession and Rebates.................................................................................................15
3. Withholding Tax (TDS)......................................................................................................16
 TDS by employer [Section 87] .............................................................................................17
 TDS on Investment return and service fee [Section 88] .......................................................17
 TDS on windfall gain [Section 88(ka)].................................................................................18
 TDS [ Section 89] .................................................................................................................18
 TDS as per other section.......................................................................................................18
 TDS is not required to be deducted.......................................................................................18
4. Advance tax collection [Section 95 Ka].............................................................................19
 Disposal of interest (securities) held in a resident entity ......................................................19

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 Disposal of land and building ...............................................................................................19
 Disposal of interest by mutual fund......................................................................................19
5. Payment of tax by Installment [Section 94]......................................................................19
6. Annual Tax Returns ...........................................................................................................20
 Submission of tax return not required [section 97(1)] ..........................................................20
 Natural person having income exceeding NRs 40 Lakhs [section 97(2) to 97(5)]...............20
7. Charges and Interest...........................................................................................................21
 Charges for failure to maintain documents or file returns: ...................................................21
 Interest for understating estimated tax payable by installment [Section 118] ......................21
 Interest for Delay or failure to pay tax [Section 119] ...........................................................21
 Fee for making false or misleading statements [Section 120] ..............................................21
 Fee for aiding and abetting [Section 121].............................................................................22
8. Renewal of Tax Exemption Certificate (Rule 5)...............................................................22
D. Value Added Tax (VAT).............................................................................................................23
 Amendments in VAT............................................................................................................23
 VAT credit not allowed or partial credit allowed [section 17(2)].........................................23
 VAT Refund Facility ............................................................................................................24
 VAT Refund..........................................................................................................................24
 Refund of Tax paid by foreign tourist [ Section 25 Ka] .......................................................24
 Other Information .................................................................................................................25
E. Excise............................................................................................................................................25
 Amendments in Excise..........................................................................................................25
 Changes in Rate ....................................................................................................................26
F. Customs........................................................................................................................................27
 Amendments in Customs ......................................................................................................27
 Changes in Custom Duty Rates ............................................................................................28
G. Other ........................................................................................................................................28
 Audit not required.................................................................................................................28
 Yearly vehicle Tax................................................................................................................28
 Road Construction and Improvement Fee: ...........................................................................29
 House & Land Registration Fee............................................................................................29
 Deduction for General Insurance Business...........................................................................29

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A. Budget Summary
Budget for Fiscal Year 2074 as Presented on 29 May 2017 by Honourable Deputy Prime Minister and
Finance Minister, Mr. Krishna Bahadur Mahara has been summarized below:
 Objectives of this budget
 To support execution of the Constitution,
 To attain sustainable, inclusive and high economic growth,
 To maintain macroeconomic stability, and
 To enhance access of general public to the service provided by the state.
 Source of Fund
 Allocation of Budget
730.05
15.00
72.17
214.04
145.00
102.73
1,278.99
565.89
10.00
110.89
195.71
111.00
55.43
1,048.92
RE V EN UE P R INCIP A L
RE P A Y ME NT
FORE IG N
G RA NT
FORE IG N
L OA N
I N TE R NA L
LOA N
CA S H
R ES E RVE
T OT A L
AMOUNT(INBILLION)
SOURCE
SOURCE OF FUND
74/75 73/74
335.17
803.53
140.29
1278.99
311.94
617.17
119.81
1048.92
C A P IT A L E X PE N DITU RE RE CURRI NG
E X PE NDITU RE
FINA N CI A L
MA NA GE MEN T
TOT A L BUDGE T
A L LOCA T E D
AMOUNT(INBILLION)
EXPENDITURE HEAD
ALLOCATION OF BUDGET
2074/75 2073/74

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Compiled by: CA. Tika Karki 9851177626 / 01-4232213 tika.ccbs@gmail.com 22
 Policy and programs of revenue mobilization for Fiscal Year 2074/75
The main priority of the federal revenue policy will be to develop and modernize the revenue system
for the development of strong federal fiscal system so as to make the national resources prosperous as
envisioned by the Constitution of Nepal. In order to develop and broaden the tax base, additional reform
will be made in the revenue system by bringing all kinds of economic activities into the tax net to ensure
sustainable revenue mobilization. Following will be the objectives of the revenue policy;
1. To make the revenue right and its distribution systematic among the Government of Nepal,
State Government and at the Local Level in line with the Constitution of Nepal.
2. To maximize resource mobilization by bringing all kinds of economic activities into the tax net
based on cooperation, coordination and partnering among Federal, State and Local Level and
to protect national tax base through revenue leakage control.
3. To reform revenue system through achieving sustainable revenue growth so as to strengthen
federal fiscal system.
4. To support minimizing increased trade deficit through trade promotion by expanding national
production and productivity.
5. To make the revenue system equitable and investment friendly by adopting clean and
transparent tax system.
6. To make the existing non-tax rates cost effective by identifying additional sources of nontax
revenue.
 Policy and programs to achieve the objectives of revenue policy
Federal Fiscal Strengthening
 Federal revenue policy to be formulated for the development of prosperous economy by making
federal fiscal structure strong and capable
 To make the State and Local Level able to independently allocate certain portion of the financial
resources by developing revenue base and enabling to fix tax rates themselves.
 The organizational structure of the revenue administration to be made compatible to the federal
structure by expanding economic activities.
 For the structural reform of revenue administration, a bill related to the formation of Central
Revenue Board will be submitted to the Legislature Parliament.
 Geographic neutrality to be maintained in the resource mobilization of the State and Local
Level without affecting inter-state and international trade.
Broadening tax base
 Tax base will be broadened by giving priority to the expansion of tax net instead of increasing
the tax rate.
 The task of allotting Permanent Account Number will be continued to all income earners
including doctors, engineers, lawyers, advisors, artists, players and individuals involved in
teaching profession in various teaching institutions, and additional taxpayers will be brought
into the tax net.
Procedural reform

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 New business code number to be brought into effect from this Fiscal Year revising the existing
business code used for the tax purpose so as to match with goods classification code based on
the harmonized customs system.
 E-payment system to be made effective in order to facilitate taxpayers to pay their taxes from
any branch of the banks that are involved in revenue collection.
 For the procedural simplification of tax system, reforms in maintaining uniformity and clarity
in administrative, legal and technical subjects.
 As a member state of the World Customs Organization, Goods Classification and Codification
2017 developed and promoted by the organization to be implemented from this fiscal year.
 Custom Automation System to be gradually made web-based.
 An arrangement to be made in a way that the importer and exporter will be allowed to import
and export for business purpose, only after getting import export code effective from 16 July
2017.
Taxpayers education
 Taxpayers Education Programs to be continued as informative and awareness raising activities
for the taxpayers and general public. Such programs related to education, information and
awareness will be conducted in the participation of and coordination with private,
nongovernment, user groups and professional agencies as well.
 Necessary coordination to be made to include tax system of Nepal in the curricula of secondary
level school to provide tax information.
Efficiency and System Development
 Revenue mobilization to be enhanced through capacity development of tax administration and
the system reform. For this purpose, arrangement will be made to have effective exchange of
information by developing integrated information network within the Ministry of Finance and
its departments.
 The system of revenue administration and its efficiency to be developed as per the federal
structure so as to facilitate the formation of revenue structure and capacity development at the
State and Local Level.
 Revenue Administration Training Centre will be developed as an academic institution to offer
capacity development and subject matter efficiency. This Centre will be developed as
Document Archiving Centre and preserving important revenue related records
Revenue Leakage Control
 For the purpose of protecting national tax base, risk indicators to be revised through identifying
revenue risk zones and controlling high tax planning and evasion.
 Information exchange to be managed between Federal, State and Local Level of revenue
administration in order to control revenue leakage.
 Trade distortion to be controlled by the use of electronic system in internal movement of goods
making efficient internal monitoring and surveillance. Patrolling to be mobilized in order to
control illegal import.
 An arrangement of payment only through banking system to be made in case of trade
transaction over certain amount with India and Tibet of China.
 Customs valuation system to be made realistic and transaction value based by enforcing
realistic customs declaration and right classification of goods.

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 Special strategy to be adopted to prevent under invoicing, illegal import/export and illegal trade.
Policy level and System Reform
 International trade to be facilitated through appropriate reform in the customs laws as per the
revised Kyoto protocol. Fifth phase of customs reform and modernization action plan and the
second five-year strategic plan of the Inland Revenue Department will be implemented.
 Revenue Leakage control act and procedure to be revised within this fiscal year. In order to
regulate and facilitate electronic trade, necessary procedure to be developed and brought into
implementation.
 Revenue exemption will be managed through expenditure system by gradually reducing the
system of revenue exemption.
 The process of double taxation avoidance agreement to be expedited with those countries
having much more transactions and having potentials of investment and technology export with
Nepal.
 Sales, distribution, regulation and management of liquor and cigarettes to be made further
effective.
 In the process of money laundering, effective law to be formulated and implement to control
foreign exchange embezzlement through hundee, electronic currency and bit coins.
 Major highlights of the budget
 Allocation of budget to Local level NRs 225.05 Billion.
 Earthquake Rehabilitation Budget NRs 146 Billion via National Reconstruction Authority.
 For the re-construction of Kathmandu Terai-Madhesh Fast Track (to be completed by Nepal
Army), NRs 10.14 Billion has been separated.
 Hulaki Rajmarga got the Budget of NRs 4.27 Billion.
 Initiation will be taken to develop Karnali Chisapani Multipurpose Project with the capacity of
more than 10,000MW as a tripartite friendship project of the friendly nations India, China and
Nepal.
 Programs for Energy sector got the budget of NRs 62.47 billion
 3 International Airports (Nijghad, Gautam Buddha and Pokhara) jointly got NRs 13.72 billion.
 Melamchi water project got the budget of NRs 6.57 billion and is targeted to be completed
within this year.
 Residential Budget NRs 2.44 Billion Under Janata Aabas program.
 Prime Minister Agricultural fund NRs 5 Billion.
 National trading, food organization, agricultural equipment centre etc to be merged and national
suppliers is to be created.
 Health Insurance to all people within 3 years.
 Both Life and General Insurance Company shall now re-Insure a portion of their risk with Nepal
Reinsurance Company Ltd.
 Newly appointed government employee shall have to contribute towards retirement while
drawing salary for each month. Government shall also contribute for the same fund.
 At least one branch of commercial bank at each of the Village Municipality and municipality
needs to be established and the banking operation of each local level needs to be done through
commercial bank only.

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 Bank account is compulsory for remittance in respect of individual going abroad for
employment
 Economic Situation
 Economic growth rate is forecasted to be 7.2 percent in FY 2074/75.
 Inflation rate forecasted to be lower than 6 percent in this fiscal year.
 Balance of payment surplus was NRs 50.64 billion as of Chaitra 2073.
 Revised total revenue collection of the current Fiscal Year 2073/74 is estimated to be 103
percent or NRs 580.98 billion against the targeted total revenue collection of NRs 564 billion.
B. Reminders for tax payers
 Type of return with due date
Particulars Return Filing/Tax
Payment
Due date
VAT return Monthly Within 25 days from the end of every month
VAT return Chaumashik Within 25 days from the end of every period
Excise returns Monthly Within 25 days from the end of every month
E-TDS return Monthly Within 25 days from the end of every month
Education service tax
return
Chaumashik Within 25 days from the end of every period
Health service tax return Chaumashik Within 25 days from the end of every period
Income Tax Return Annual return** Ashoj end of every year
Note:
 Chaumashik - quadrimestres
 Rule 26(3ka) of VAT Rule: - If the hotel and tourism entrepreneur opt, department may allow a tax
period of two months
 Rule 26(3kha) of VAT Rules: - If the brick industry, press, press & electronic publications and
distribution house opt, department may allow a tax period quadrimestres (four months).
 Deadline to file income tax return may be extended maximum 3 months from the date the return was
originally to be filed.
 Education Service fees (In case of Educational Institution) is 1.00% on tuition & admission fess
 Health Service tax (In case of institution providing health service) is 5.00% on health service
provided.
 Various important deadline
SN Particulars Due date
1 Verification of purchase and sales registered
(Only for person registered in VAT and not opted computerized
billing)
Within Shrawan end
2 Renewal of excise licence Within Shrawan end
3 Estimated tax return Within Poush end
4 1st Installment of advance tax Within Poush end
5 Advance tax in case of turnover tax- transaction till poush 20 Within Poush end

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6 Revised estimated tax return- Chaitra Within Chaitra end
7 2nd Installment of advance tax Within Chaitra end
8 Revised estimated tax return- Ashad Within Ashad end
9 3rd Installment of advance tax Within Ashad end
10 Advance tax in case of turnover tax- transaction till Ashad 20 Within Poush end
11 Annual General Meeting (AGM) Within 6 months from end of FY
12 OCR return filing - Private Company Within 6 months from end of FY
13 OCR return filing - Public Company Within 30 days from AGM
 Fine and Penalties in case of defaults:
SN Default Remarks
1 Sales and purchase registered not verified within
end of Shrawan
NRs 10,000.00
2 Renewal of excise licence Within 3 months from due date: 25% of renewal
amount
then next 3 months: 50% of renewal amount
then next 3 months: 75% of renewal amount and
Till Ashad end: 100% of renewal amount
3 VAT return/ Excise return not filled 0.05% per day or NRs 1,000 per return
4 Education service tax and Health service tax
return not filled
NRs 1,000.00 per return
5 VAT amount not paid Interest: 15% per annum
fee: 10% per annum
6 Excise tax amount not paid 0.05% per day
7 Estimated tax return Sec 117(ka) NRs 2,000.00
8 Advance tax - installment not paid.
TDS amount not paid
Other Tax
Sec 119(1)
Interest: 15% per annum
9 E-TDS return not filled Sec 117(3) 1.5% per annum
 Revenue Code:
Income Tax
Revenue Code Revenue Title
11111 Personal, Proprietorship firm
11112 Remuneration tax
11113 Capital Gain tax - Personal
11122 Public Co
11123 Private Co
11124 Partnership firm, Cooperative, foreign co, Trust etc
11125 Capital Gain tax - Entity
11131 Rent / lease/ Vehicle hire

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11132 Interest Tax
11133 Dividend Tax
11134 Tax on Other Investment
11135 Windfall gain tax
11136 Tax on other income
11211 Social Security Tax
11441 Foreign manpower service
11442 Health service
11443 Education services - Private education institution
11444 Education services - Foreign study
14152 Casino Royalty
14156 Other Royalty
14214 Telecommunication services
VAT
11411 Manufacturing/ Production
11412 Import
11413 Wholesale and retail sales
11414 Services (consultancy)
11415 Tourism (Ture & Travel. Tracking, hotel, rafting etc)
11416 Other services (Telecommunication, insurance, aeroplane tax)
11417 Reverse charge
Excise
11421 Tobacco
11422 Wine
11423 Beer
11424 Other manufacturing except 11421, 11422, 11423)
11425 Import

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D. Income Tax
1. Amendment in Income Tax Act
Section Existing Provision 73/74 Amended Provision 74/75
Section
2(s):
Tax Exempt
Entity
“Tax Exempt Entity” means the following
entity:
1. Following organizations registered in IRD
as organization entitled to tax exemption
a. A social, religious, educational, or a
charitable organization of a public character
established without having a profit motive,
b. An amateur sporting association formed
for the purpose of promoting social or
sporting facilities not involving the
acquisition of gain,
2. A political party registered with the
Election Commission,
3. Village Development Committee,
Municipality or District Development
Committee
“Tax Exempt Entity” means the following
entity:
1. Following organizations registered in IRD
as organization entitled to tax exemption
a. A social, religious, educational, or a
charitable organization of a public character
established without having a profit motive,
b. An amateur sporting association formed
for the purpose of promoting social or
sporting facilities not involving the
acquisition of gain,
2. A political party registered with the
Election Commission,
3. REMOVED
Section 2
(x):
Entity
“Entity” means the following:
2. VDC, Municipality or DDC
3. Nepal Government
“Entity” means the following:
2. Rural Municipality, Municipality or
District Coordination Committee
3. Nepal Government, State Government or
Local Body
Section 10:
Tax
Exempt
Amount
The following amounts shall be exempted
from income tax:
(Nga) Allowances provided by Government
of Nepal to Widows, Elder Citizens, or
Disabled Individuals;
(Jha) Income of Nepal Government.
The following amounts shall be exempted
from income tax:
(Nga) Allowances provided by Government
of Nepal, State Government or Local Level to
Widows, Elder Citizens, or Disabled
Individuals;
(Jha) Income of Nepal Government, State
Government or Local Level
Section 11: Business Exemption and Concession
Section 11
Clause (b):
Explanation
“Remote”, “Undeveloped”,
“Underdeveloped Area” means the areas as
referred to in Schedule-3 of Industrial
Enterprises Act,2049.
“Remote”, “Undeveloped”, “Underdeveloped
Area” means the areas as referred to in
Schedule-10 of Industrial Enterprises
Act,2073.
Note: In Sec 11 (2) and sec 11(2ka), the word rural areas have been replaced by word rural municipalities.

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Section 11
Clause (c):
Explanation
Special
Industry
Special Industry means a Manufacturing
Industry, Agro and Forest Based Industry
and Mineral Industry as categorized in
Section 3 of the Industrial Enterprises
Act,1992, other than an industry producing
cigarettes, bidi cigar, chewing tobacco,
khaini, or other goods of a similar nature
using tobacco as the basic raw material, or
alcohol, beer, or other goods of a similar
nature.
Special industry means a Manufacturing
Industry, Agro and Forest Based Industry and
Mineral Industry as categorized in
Section15(2) of the Industrial Enterprises
Act, 2017, other than an industry producing
cigarettes, bidi cigar, chewing tobacco,
khaini, or other goods of a similar nature
using tobacco as the basic raw material, or
alcohol, beer, or other goods of a similar
nature.
Amendments in Industrial Enterprise Act, 2017
Section As per Industrial Enterprises Act 2017 As per Finance Bill
22 (1)(i)
Income Tax
Concession to
Industry
Following concession in income tax shall
be granted to the *industries those who
give direct employment to following
Nepalese Citizens throughout they the
year and registered under Industrial
Enterprise Act, 2017
Particulars Tax rebate
Employee≥300 15% of applicable
tax rate
tax rate
*Industries means
 Manufacturing Industries
 Information Technology and
Communication Industry
Following concession in income tax shall
be granted to the *industries registered
under Industrial Enterprise Act, 2017 and
those who give direct employment to
following Nepalese Citizens throughout
the year:
Particulars Tax rebate
tax rate
tax rate
*Industries means
 Manufacturing Industries
 Information Technology Industry
Note: Income Tax Rebate provided to Communication Industry withdrawn by Finance Bill 2074.
2. Tax rate applicable for FY 2074/75(2017/18)
There has been no change in tax rates applicable for individual and entity from budget this year. The
existing tax rates to be continued in this FY 2074/75 are as:
 Tax rate for Natural Resident Person:
SN Tax Rate (%) Slab in Amount(NRs.)
Individual Couple
a 1 350,000 400,000
b 15 350,001 -450,000 400,001 - 500,000
c 25 450,001 - 2,500,000 500,001 - 2,500,000
d 35 ** Above 2,500,000
 ** If the natural person has taxable income of NRs. 25 lacs and above, additional tax need to be paid,
calculated as 40% of tax liability for income above NRs. 25 lacs.
 A natural person (individual) is a resident in Nepal for an income year, if he satisfies any of the
following 3 conditions:

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i. If his habitual (Normal) place of abode is in Nepal, or
ii. If he resides in Nepal for a period of 183 days or more in an income year or
iii. If he is an employee of GON deputed by the employer in foreign country.
Notes:
 1% tax (i.e. Social Security Tax or SST) on first slab is not levied for sole proprietorship firm and
income from pension.
 1% tax (SST) is required to be deposited separately in Revenue Account No.11211.
 Husband and Wife having separate income source are given choice to adopt either to get assessed
separately or jointly as family.
 Income of Natural person earned from an agricultural business in the land other than as referred to in
clauses (d) and (e) of Section 12 of the Act relating to Land, 2021(1964) is tax exempt. (sec 11 (1)).
 If a Natural Person is engaged in the operation of a Special-Industry mentioned in section11 of the
Act throughout the Year, tax shall be levied by 20% in place of 25% of the Taxable Income.
 Deductions and facilities for Resident Persons:
 Remote area Benefit
Natural person working at remote areas are entitled to get deduction from taxable income to a
maximum of NRs. 50,000 depending on remote area category as follows:
Category Deductions
(Amount in NRs)
A 50,000
B 40,000
C 30,000
D 20,000
E 10,000
 Foreign Allowance
In case a natural person who is employee of GON is deputed in Diplomatic mission of Nepal situated
in foreign country derives allowance in the head foreign allowance, 75% of amount derived in the
head foreign allowance is deductible from taxable income.
 Additional limit for pension income
In case of resident natural person derives any pension income during income year, the amount
equivalent to lower of following is deductible from taxable income.
i. Amount derived as a pension income, or
ii. 25% of amount prescribed under first tax slab.
**The facility is proportionately calculated for period of stay.
***The remote areas are categorized by GON.

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 Incapacitated natural person
Incapacitated natural person shall be entitled to get deduction from taxable income an additional 50%
of amount prescribed under first tax slab.
 Life insurance premium
A Resident natural person who has procured life insurance and paid premium amount thereon shall be
entitled to a deduction of actual annual insurance premium or NRs. 20,000 whichever is less from gross
taxable income.
 Health insurance premium
A Resident natural person who has procured Health Insurance and paid premium amount thereon shall
be entitled to a deduction of actual annual insurance premium or NRs. 20,000 whichever is less from
gross taxable income.
 Rebate on tax liability for resident female with only employment income
In case of the female employee whose taxable income is only from employment than 10% rebate is
allowed on tax liability.
Income tax manual requires the female to opt for individual of tax to avail the rebate facility.
 Contribution to Approved Retirement Fund (ARF) - (Section 63)
A natural person making contribution to ARF may claim to have their taxable income reduced by
amount lower of following (Rule 21):
i. NRs 300,000, or
ii. 1/3rd
of assessable income
iii. Actual contribution.
 Tax credit for resident persons
 Medical tax credit
A resident natural person may claim medical tax credit for approved medical expenses. Medical tax
credit shall be lower of following:
i. NRs 750, or
ii. 15% of approved medical expenses plus unabsorbed tax credit carried from previous year, or
iii. Actual tax liability
Notes:
 Any unutilized expenses can be carried forward to next year.
 Approved medical expenses does not include cost incurred for cosmetic surgery.

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 Foreign tax credit
If foreign income is included in taxable income of a resident natural person, tax paid in foreign country
in respect of that income is allowed as credit. The foreign tax paid can either be deducted as expenses
or tax liability in Nepal can be reduced by such tax paid up to average rate of tax applicable in Nepal,
depending on the option of tax payer.
 Tax rate for Non-Business Chargeable Assets (NBCA):
In case of resident natural persons, gain from NBCA (i.e. land, buildings and shares) is taxable as
follows:
a) 2.5% (if land or land and building held for 5 years or more) and 5% (if less than 5 years)
b) 10% on sale of shares of non-listed entity.
c) 5% on sale of shares of listed entity.
Notes
Gain from NBCA includes:
 Gain from sale of building owned and resided for less than 10 years and disposed for more than NRs.
30 lacs and gain from sale of land disposed for more than NRs 30 lacs.
 Gain from sale of shares of companies.
 Tax rate for Non-Resident Person:
SN Nature of transaction Rate
a Income earned from normal transactions. *** 25% flat rate
b Income earned from providing shipping, air transport or telecommunication
services, postage, satellite, optical fiber project.
5%
c Income earned providing shipping, air transport or telecommunication
services through the territory of Nepal.
2%
d Repatriation by Foreign Permanent Establishment 5%
e Capital Gain tax on sale of shares in resident entity (Withholding tax 10%
Plus final tax 15%) subject to tax treaties.
25%
Note:
 Slab not applicable for Non-Resident.
 Non-resident natural person are allowed to claim “Remote area benefit”.
 Presumptive Tax
 Natural Person engaged in business of Public Vehicles:
SN Type of Vehicle (Nature) Applicable Rate per vehicle (NRs)
a Bus, Mini Bus, Truck, Mini Truck 3,000
b Car, Jeep, Van, Micro Bus 2,400

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 Small Business Person
The amount of Presumptive Tax for resident natural person whose annual turnover is less than NRs.
20 lakh and income not exceeding NRs 2 Lakh and not registered in VAT as follows:
SN Area Applicable tax amount (NRs)
a Metropolitan, Sub-Metropolitan 5,000
b Municipal Areas 2,500
c Other than metropolitan and municipal areas 1,500
 Turnover (Transaction based) Tax
Resident Natural Person who fulfills all the following conditions:
a) The person generates income only from
business having source in Nepal.
b) The person does not claim Medical Tax
Credit.
c) The person does not claim advance tax
arising out of tax withheld by
withholding agent.
d) The transaction of the business exceeds
NRs. 20 Lakhs and is less than NRs 50
lakhs.
e) The person not registered for VAT
purpose, and
f) ^* The person does not have income
related to consultancy and expert
professional services including that
provided by doctor, engineer, auditor,
lawyer, sportsman, artist, and
consultant.
Then the tax applicable will be as follows:
SN Particulars Rate
a For person dealing in cigarette, gas, etc. in which the person makes sales
by adding 3% commission or profit.
0.25% of Turnover
b For persons dealing goods besides that specified in (1) above. 0.75% of Turnover
c Persons dealing in service^* business 2 % of transaction amount. 2% of Turnover
 However, if amount calculated above is less than NRs. 5,000 then NRs. 5,000 is imposed on such
cases.
 Tax as above should be paid in 2 installment:
1st installment in Poush and 2nd installment in Ashad
based on actual transaction up to 20the day of the month respectively.
c Three-Wheeler, Auto Rickshaw, Tempo 1,550
d Tractor and power Tiller 1,000
Note: Natural Person (Not necessarily resident person)

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 Tax rate for entity
SN Entities Tax Rate
1 Export income of Manufacturing Industries. 15%
2 Other Export Entities 20%
3 Co-operative Institution registered under Co-operative Act, #**#
(except dealing in exempted transaction)
4 Entities constructing & operating road, bridges, tunnel, ropeway, trolley bus and
tram
5 Special Industries **
6 Entity wholly engaged in the projects conducted so as to build public infrastructure,
own, operate and transfer (BOOT) it to the GON & in power generation,
transmission, or distribution
7 Other entities not covered above. 25%
8 Bank and Financial Institution, General Insurance business. 30%
9 Business for cigarette, bidi, cigar, chewing tobacco, khaini, liquor and beer
10 Petroleum companies
11 Income of Mutual Funds. NIL
Notes:
 ** Special industry shall also include manufacturing, agriculture, forestry and mining industries as
defined in sec 11 of the Act.
 #**# New Co-operative act has mentioned the reduced tax rate as per the classification however,
such was not yet amended in Income Tax Act. Hence applicable tax rate for this financial year is
20%.
 Additional deduction for business
Any entity may deduct 50% of capital amount for power generating assets in the year of acquisition as
additional depreciation.
Capital expenditure incurred for purchasing fiscal printer and cash machine can be claimed as
depreciation in the year of purchase.
 Carry forward of normal business loss
Carried forward for 7 Years: A business loss may be carried forward and set off against future
business profits in the next 7 assessment years.
Carried forward for 12 years: In certain business such as projects involved in construction,
generation and transmission of electricity projects involved in construction and operation of public
infrastructure projects under BOOT and persons dealing in Petroleum, the business loss is allowed to
be carried forward to be set off for next 12 income years.

Kandel & Associates
 Tax Concession and Rebates
1 Special-Industry operated in a least developed area for 10
years from establishment.
10% of applicable rate
(i.e.10% of 20=2%)
2 Special-Industry operated in undeveloped area for 10 years
from establishment.
(i.e.20% of 20=4%)
3 Special-Industry operated in under developed area for 10
years from establishment.
(i.e.30% of 20=6%)
4 Income from construction and operation of Road, Bridge,
Airport and Tunnel and income from investment in tram and
trolley bus.
60% of applicable tax rate
(i.e. 60%*20=12%)
5 Industry established in least developed areas producing fruit-
based brandy, cider or wine for the first 10 years from
commercial transaction.
6 Special industry, agriculture industry, tourism industry
providing employment to minimum 100 Nepalese Citizen
only.
(i.e.70% of 20=14%)
7 Income from export of manufactured goods by Manufacturing
Industries.
75% of applicable tax rate
(i.e.75% of 20=15%)
8 Royalty from export of intellectual property by a person.
9 Special Industry providing direct employment to 1200 or
more Nepalese citizens throughout the year.
(i.e.80% of 20=16%)
10 Special Industry providing direct employment to 100
Nepalese including 33% women, dalit & incapacitated
person throughout the year.
11 Entities relating to manufacturing, tourism service, hydropower
generation, distribution and transmission, and entities
mentioned in sub-section (3c) of Section 11 i.e. IT industry at
IT park, having listed in stock exchange (capital market).
85% of applicable tax rate.
(i.e. 20*85%=17%)
12 Special Industry and Information technology industry providing
direct employment to 300 or more Nepalese citizens
throughout the year.
(i.e.90% of 20=18%)
13 Income derived as service charge or royalty for technology
transfer or management services provided by a foreign investor
for the industries established at Special Economic Zone.
50% of the applicable rate
14 Industry relating to software development, data processing,
cyber, café, digital mapping industry established at IT park,
Bio-tech Park or technology park as declared by government.
15 Income from sale of intellectual property by a person through
transfer.
16 Person or entity having licensed to generate, transmit or
distribute electricity starting its commercial production,
transmission and distribution up to Chaitra end 2080 B.S., Such
facility shall also be provided to the solar power, wind power
and bio-power production.
First 10 years - 100% exempt
Next 5 years - 50% of applicable
rate.

Kandel & Associates
17 Industry established in 'Special Economic Zone' at Specified
Economic Zone situated at Himali districts or at any hilly
districts notified by Government of Nepal. ^*^
then after - 50% of applicable
rate.
18 Industry established in 'Special Economic Zone' other than
above locations. ^*^ i.e other than himali/hilly locations.
then after - 50% of applicable
rate.
19 New Special Industries established with more than 1 billion (1
arab) capital and providing direct employment to more than
500 individuals throughout the year.
rate.
20 Dividend distributed by Industry in Special Economic Zone.
(Dividend tax)
21 Industry related to tourism industry or airlines having
international flights established with capital investment of more
than NRs. 2 billion (2 arab). (From commencement of
business.)
22 Currently operating industry providing direct employment to
more than 500 individuals throughout the year enhancing at
least 25% of existing capacity and making capital investment
of one billion.
Income from enhanced capacity
rate.
23 For above entities currently in operating increases its capital up
to 2 billion (2 arab) by enhancing at least 25% of its installed
capacity.
24 Person engaged in petroleum or natural gas exploration and
extraction if commence its commercial operation within 2075
Chaitra end. (From the date of operation)
rate.
25 Special industry, agriculture-based industry and tourism-
based industry capitalizes its profit (issues bonus shares) for
the purpose of expansion of capacity of industry.
Full Exemption of Dividend Tax
on such bonus shares.
Note:
 If any company is entitled to more than one privilege as mentioned in tax concessions, only one will
be entitled as opted by the entity.
3. Withholding Tax (TDS)
Withholding tax need to be deposited along with TDS Return with IRO within 25 days from end of
month.
Withholding Tax Certificate should be issued to the person from whom tax has been deducted based
on the TDS Return filed with IRO to get the credit for such withholding tax.
Delay in submission of Tax or Return will attract penal provision as per the Act.
Applicable Rate of interest is 15% per annum.
The Withholding tax (TDS) is required to be deducted as per the rate below during the Financial Year
2017-18 [with effect from. 1.4.2074 (i.e. 16.07.2017)

Kandel & Associates
 TDS by employer [Section 87]
SN Particulars Rate Remarks
1 Remuneration Normal rate of
Individual
Social Security Tax – 1%
Remuneration Tax - other
Notes:
Resident employer should deduct TDS while payment of salary and wages with source in Nepal to an employee
as follows:
 Monthly TDS = Annual tax calculated as per schedule 1 on annual employment income divided by
12.
 The withholding tax is not final, but the employee is exempt from submitting return provided certain
conditions are fulfilled such as only Nepal sourced employment income, one employer at a time etc.
and the taxable income of such person does not exceed NRs 40 lacs.
 If the employee has foreign sourced income or the taxable income of such employee exceeds NRs 40
lacs, tax return is mandatory.
 TDS on Investment return and service fee [Section 88]
1 Lump Sum Retirement Payment from Approved Fund & Nepal
Government under Sec 65(1b)
5%
Final
2 Income distributed by Mutual Fund to Natural Person
3 Gain from unapproved retirement fund.
4 Interest on Deposits / Debentures from Resident Bank, Finance
Companies or listed companies and on Govt. Bonds to Individuals not
related to business.
5 Commission paid to Non-resident by a resident employment company
6 Aircraft Lease
10%
7 Payment against use of satellite, bandwidth, optical fiber,
telecommunication equipment or electricity transmission line by resident
person.
8 Payment of rent made by resident person having source in Nepal
Note: No TDS is required on vehicle rent paid to owners of public
vehicles who pay presumptive tax each year (As per tax manual)
9 Rent paid to vehicle service provider registered under VAT.
1.50%10 Payment of service fee, advertisement, commission etc to VAT
registered/VAT exempted service provider.
11 Gain from investment insurance
- In case of death claim
- In other case.
Exempt
5% Final
12 Teaching-not on regular basis (Part time teaching)
15%
13 Meeting Allowances
14 Royalty, service charge, commission, Interest, Bonus on sales/ target
bonus/incentive etc except mention otherwise

Kandel & Associates
15 Payment for natural resources
16 Income distributed by Mutual Fund to Entity
 TDS on windfall gain [Section 88(ka)]
1 Wind fall gains 25% Final
2 Wind fall gains from Literature, Arts, Culture, Sports, Journalism,
Science & Technology and Public Administration amount received up
to 5 lacs
No TDS
 TDS [ Section 89]
1 Contract payment exceeding NRs 50,000 including payments in the
past Ten days
1.50%
Final2 Payment on contract to Non-Resident person for repair of aircraft &
other contract
5%
3 On payment of insurance premium to non-resident insurance company 1.50%
 TDS as per other section
1 Payment of dividend by resident company and proprietorship firm. 5% Final
2 Dividend paid by other entities No TDS
3 Payment made to the non-resident person after withholding tax. Final
4 Interest income up to NRs. 25,000 on deposit under 'Micro Finance
Program', Rural Development Bank', 'Postal Saving Bank' &
Cooperative (u/s - 11(2)) in rural municipalities.
Exempt
 TDS is not required to be deducted
In the following case TDS is not required to be deducted:
a) Payment made by natural person except the payment related to his/her business.
b) Payment of remuneration to the writer of the articles published in Newspaper & magazines.
c) Payment of remuneration for preparation of question paper or checking of answer sheet.
d) Payment of interest to a resident bank or other resident financial institution.
e) Payments that are exempt from tax.
f) General insurance premium.
g) Interregional interchange charges paid to a bank issuing Credit Cards.
h) Interest or fee paid by Nepal Govt., under an agreement, to Foreign Govt. or an international
organization (to which Nepal is a party).

Kandel & Associates
i) Interest and Dividend paid to Mutual Fund.
4. Advance tax collection [Section 95 Ka]
On gain from transaction on commodity future market – 10%
 Disposal of interest (securities) held in a resident entity
SN Particulars Rate
Natural
Person
Other than
natural person
1 Gain on disposal of Listed securities 5% 10%
2 Gain on disposal of Unlisted securities 10% 15%
 Disposal of land and building
SN Particulars Ownership Rate
Natural
Person
Other than
natural person
1 Gain on disposal land or land and building Less than 5 years 5% 10%
(In every case)5 years or more
but up to 10 years
2.5%
Note:
 The land revenue office will collect advance tax as above at the time of registration on the capital
gain from disposal of land or land and building.
 Gain for Natural person on transaction exceeding NRs. 3 million collect by land revenue office at
the time of registration.
 If the building is owned and resided for a period more than 10 year, it does not fall in the definition
of NBCA and so is not taxable.
 Disposal of interest by mutual fund
 No advance tax collected on disposal of interest by mutual fund.
5. Payment of tax by Installment [Section 94]
 A person who derives or expects to derive any assessable income during an income year from
business or investment shall require paying tax for the year by 3 installment as follows:
SN Time period Amount Payable
1 By the end of Poush 40% of estimated tax.
2 By the end of Chaitra 70% of estimated tax.
3 By the end of Ashad 100% of estimated tax.
 A person who pays tax on turnover shall require paying tax for the year by two installment as
follows:

Kandel & Associates
SN Time period Amount Payable
1 By the end of
Poush
Tax calculated at the prescribed rate on the basis of actual turnover till poush 20.
2 By the end of
Ashad
Remaining amount of tax payable based on estimated turnover. Estimated
turnover for the income year shall be calculated on the basis of actual turnover
till Ashad 20.
Note:
 The person paying tax under installment can claim such tax as advance tax while calculating
tax payable by him/her for the year.
 If the total amount of estimated tax of all 3 installment during the income year is less then Rs
5,000, then the person is not required to make payment of installment tax.
6. Annual Tax Returns
Annual tax return should be filed within 3 months form end of an income year. So, the due date of
filing annual tax returns for an income year 2074/75(2017/18) is Ashoj end 2075 (Mid Oct 2018).
However, a taxpayer may have this due date extended for a maximum period of 3 months i.e. up to
Poush end 2075 (Mid Jan 2018) in case he files an application in the IRD with bonafide reasons for
such extension. This extension only applies to tax return submission and not for payment of tax.
 Submission of tax return not required [section 97(1)]
Following persons are not required to submit annual income tax return unless specifically required by
IRD in writing or through public circular:
a. Person who has no taxable income in an income year.
b. Person receiving a final withholding payment during the income year.
c. A resident natural person satisfying all the following conditions:
 Person’s income consists exclusively income from any employment income having
source in Nepal.
 Person has only one resident employer at a time during the year, even if employment
changes
 Person does not claim [medical tax credit u/s 51, contribution to approved retirement
fund u/s 63 and donation u/s 12]
d. A natural person who is owner of vehicle used as public transportation and is liable to pay tax
under section 1(13) of schedule.
 Natural person having income exceeding NRs 40 Lakhs [section 97(2) to 97(5)]
No matter what is written in section 97(1), the person is required to submit tax return as per section
96.
The return of such natural person shall also include the amounts generated by such person u/s 5(d) -
windfall gain, u/s 7(3) – amounts not required to be included in business income, u/s 8(3) and u/s 9(3)
final withholding payments and exempt amounts, and amounts exempted u/s 11 of the act. However,
the interest income and meeting allowances are not required to be included in such return. Sec 97(3)
From the amount so calculated, final withholding payments and amounts exempted u/s 11 shall be
deducted. However, meeting fee and interest cannot be deductible. Sec 97(4)

Kandel & Associates
7. Charges and Interest
 Charges for failure to maintain documents or file returns:
SN Particulars Charges
1 Failure to maintain accounts and records as
mentioned in section 81.
Higher of the following;
- 0.1% of turnover without any deduction or
- NRs 1,000 per annum.
2 Failure to submit estimated tax return as per
section 95(1).
NRs 2,000 for failure to file return within
poush end.
3 Income tax return not filed as per section 96(1) as
mentioned in section 4(4).
For Small (Presumptive) Tax Payer
NRs 100 per months
For Large tax payer
Higher of the following;
- 0.1% of turnover without any deduction or
- NRs 100 per month.
4 Failure to E-TDS return within 25 days of
following month of deduction as per section
90(1).
1.5% per annum
Note: Calculated on the basis of each month of
delay treating a part of a month as one month.
5 Return not filed by the person responsible for
collecting advance tax as per section 95 ka.
6 Delay in submitting financial statements by the
tax exempted entity within 3 months of end of
income year.
0.1% per annum of amount shown in the
income statement.
 Interest for understating estimated tax payable by installment [Section 118]
Person shall be liable to pay the interest @15% on the excess amount if the amount of each
installment paid by the person for an income year is lower than 90% of amount to be paid on
installment calculated on the actual tax payable by the person.
 Interest for Delay or failure to pay tax [Section 119]
A person who fail to pay tax on or before the date on which the tax is payable is liable to pay interest
for each month or part of month for which any tax is outstanding calculated @15% applied to the
amount outstanding.
While calculating the interest, the extension granted under section 98 is ignored.
In case a withholding agent or collecting agent has delayed in making payment of the amount of
deemed withholding tax or advance tax, it cannot charge the interest to the other person.
 Fee for making false or misleading statements [Section 120]
Statement is false or misleading;
 Without knowingly : 50% of the underpayment of tax or
 Knowingly……………...: 100% of underpayment of tax.

Kandel & Associates
 Fee for aiding and abetting [Section 121]
A person who knowingly or negligently helps, aids, abets or advises any taxpayer to commit any of
the offences referred to in this act is also punishable with a fee of 100% of the underpayment of the
tax by the taxpayer.
8. Renewal of Tax Exemption Certificate (Rule 5)
Tax exempt organisation are required to get renew their tax exemption certificate within 3 months of
the end of fiscal year i.e. within Ashoj end, for which an application shall be filled along with
following documents:
a) Audited financial statements
b) Withholding tax return and proof of deposit of WHT.
Tax exempt organisation are also required to submit tax return only when exempt organisation has
taxable income.
Tax exempt organisation cannot enjoy tax exemption benefits unless the certificates are renewed.
Note: If the Tax-Exempt Organisation (TEO) fails to submit its audited FS within 3 months from
end of FY, then shall pay fees equivalent to 0.1% of its gross revenue.

Kandel & Associates
E. Value Added Tax (VAT)
 Amendments in VAT
8(2):
Reverse
VAT
The recipient of services in Nepal whether
registered or not from a person outside
Nepal shall have to assess and collect tax at
the taxable value in accordance with this
Act and Rules there under at the time of
payment for service
The recipient of services in Nepal whether
registered or not from a person outside Nepal
shall have to assess and collect tax at the taxable
value in accordance with this Act and Rules there
under at the time of receipt of service or
payment whichever is earlier
Sec 18 (1):
Return of
Tax to be
submitted.
Every taxpayer shall, upon making
assessment of the tax payable by him/her in
every month, submit the tax description, as
prescribed, before the Tax Officer or by
registered post within 25 days of
completion of that month. Such description
shall be submitted whether or not a taxable
transaction was carried out in that month or
not.
Every taxpayer shall, upon making assessment of
the tax payable by him/her in every month, submit
the tax description, as prescribed, before the Tax
Officer or by registered post or by Electronic
Means within 25days of completion of that
month. Such description shall be submitted
whether or not a taxable transaction was carried
out in that month or not.
Changes in Schedule 1:
Existing Provision 73/74 Amended Provision 74/75
87.10
Pedestrian controlled tractors
87.10
Single axle tractors
8701.20.90
Other
Other of following capacity:
8701.20.91- not exceeding 18 kilowatt.
8701.20.92-exceeding 18 kilowatt but not exceeding 37 kilowatt
8701.20.95-exceeding 130 kilowatt
Group 11 (a) Goods
Following goods has been added in the exemption list just before 27.10:
Petroleum oil (except crude oil) and oil extracted from bitumen minerals, oils containing 70% or more
of petroleum oil or oil extracted from bitumen minerals, preparations not elsewhere mentioned
containing these oils as main constituents, except bio diesel and waste oils
Group 11 (aa)
Other has been updated to include: Services provided by State and local government.
 VAT credit not allowed or partial credit allowed [section 17(2)]
 Rule 41(1): VAT paid on beverages, alcohol, mixed or without alcohol like juice, mineral
water, wine, beer, petrol used for vehicles and entertainment expenses shall not allowed for
tax credit even if incurred in connection with taxable transactions.

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 Rule 41(2): With regards to motor vehicles with three or more wheels used on a road for
carriage of passengers like bus, minibus, car, jeep, van, double cab pickup, auto rickshaw
etc., tax credit shall be allowed only 40 % of the VAT paid amount. However, for vehicles
used for carriage of goods tax credit shall be allowed for the full VAT paid amount.
 Rule 41(3): Registered person who carries business of goods mentioned in [ Rule 41(1) and
41(2) as the principle business, there shall be no restriction for the tax credit.
 VAT Refund Facility
VAT refund facility available on the following:
SN Particulars VAT refund Remarks
1 Maida (Flour Industry) 25% of VAT collected on Sales
less paid on Purchases
Sold to VAT registered
persons
2 Mustard Oil, Vegetable Ghee and
other processed edible oil
40% of VAT collected on Sales Sold to VAT registered
persons
3 Mobile, Phone Set Industry 40% of VAT paid on Purchase/
Manufacture
Sold to VAT registered
persons
4 Textile Industry ** 70% of VAT Collected Sold to VAT registered
persons or Govt entity
5 Sugar Industry 90% VAT Collected Sold to VAT registered
persons
6 Dairy Industry / Tea Industry 50% of VAT Collected
7 Copper Industry 25% of VAT Collected
8 Import of Construction Equipment,
machineries and its spares parts by
Hydropower Projects
Exempt
9 Spares Parts of Jute Industry on
recommendation from DOI
Exempt
Note:
 **However, domestic textile producing 100% cotton cloths - remaining amount of tax collected on
its sale after deducting the tax paid on Purchase refunded.
 VAT Refund facility shall not be available in case of bulk sale to another entity and sale to any other
industry or to Non-VAT registered party in case of Oil and Vegetable Ghee Industry
 VAT Refund
The registered person in the following case required to file application for VAT refund to tax office:
 Local Sales: Registered person who has VAT receivable for continuous period of 6 months
 Export sales: Registered person who exports more than 40% of the person’s total monthly
sales in any month
 Refund of Tax paid by foreign tourist [ Section 25 Ka]
Foreign tourist visiting in Nepal purchases taxable goods amount more than of NRs 25,000 and takes
along with himself the goods from Nepal via air transport shall be refunded. But service charge of 3%
shall be deducted by the department at the time of refund on such amount.

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Note:
 Refund facility is not available for foreign tourist returning by road.
 The purchased goods must have been taken out of Nepal by foreign tourist.
 Other Information
 VAT Rate remains unchanged at 13.00%
 Threshold of VAT on goods remains at NRs 50 Lakhs.
 The Threshold for Service and Service and Goods mixed business remains NRs. 20 Lakhs
 Compulsory vat registration for a person importing items exceeding NRs 10,000 at a time for
commercial purpose
 Sale of Raw Material and Manufactured Goods to industries operating in Special Economic
Zone, established under prevalent Law, shall be taxed at Zero %
 The VAT Exemption is available on PUBLIC TRANSPORT only (Private Transport Taxable)
(Group 9 to Schedule-1).
 Re-insurance exempted from VAT (Schedule 1 to VAT Act (Group 11(4).
 Manufacturers (not having Bonded Warehouse or Pass Book facility) shall get refund of VAT
at Flat Rate at custom point against export of finished goods on VAT paid on import of Raw
Materials, Auxiliary Raw Materials and Packing Material (not manufactured in Nepal) used for
manufacturing such finished goods.
 Industries having an export over 40% of total sales during last 12 months, may import raw
material to the extent of manufacture of export quantity against Bank Guarantee of VAT
amount. The value addition on such export is 10%
 Penalty of NRs. 20,000 per visit if not allowing to inspect the VAT records to the tax office.
F. Excise
 Amendments in Excise
3 A (5) Excise Duty paid on auxiliary Raw Material
and Packing Material cannot be set off with
Excise Duty Liability.
Excise Duty paid on auxiliary Raw Material,
Packing Material,
Excise duty paid on import of custom duty
exempted raw material and spare parts
cannot be set off with Excise Duty Liability.
4 C (2) (d) No Provision Armed personal carrier, vehicle, ammunitions
and other goods taken under record for use of
Army, Armed Police Force and Nepal Police
engaged in peacekeeping mission under
request of UN.
4 D (2)
Control in
sale and
Distribution
Person dealing in sale and distribution of
liquor and tobacco in Metropolitan City,
Sub Metropolitan City, Municipality and
Main Highways declared by Department
should involve in business of liquor and
tobacco only.
Person dealing in sale and distribution of
liquor and tobacco should involve in business
of liquor and tobacco only.
The same provision is not applicable to Hotel
and Restaurant Business.

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The same provision is not applicable to
Hotel and Restaurant Business.
4 D (3) No Provision Person who have license to sale and distribute
tobacco, shall sale and distribute through
separate outlet.
4 D (4) Departmental store should sale and
distribute liquor through separate section
Notwithstanding clause 2 and 3, Departmental
store should sale and distribute liquor and
tobacco through separate section
10 H (b)
Recovery of
Due Excise
Duty
If any person does not pay the excise duty
to be paid within the time limit as referred
to in this Act, the concerned Excise Duty
Officer my recover the same by way of
following measures:
- By having deduction of such amount
from the amount payable by the
Government of Nepal or any corporate body
owned by the Government of Nepal or local
body to such a person
If any person does not pay the excise duty to
be paid within the time limit as referred to in
this Act, the concerned Excise Duty Officer
my recover the same by way of following
measures:
- By having deduction of such amount from
the amount payable by the Government of
Nepal or any institutional body owned by the
Government of Nepal or State Government
or institutional body owned by State
Government or local level to such a person.
Changes in notes to Schedule
7 50% exemption in excise duty on local
production of motorcycle and 25%
exemption on local production of other
vehicle
25% exemption in applicable excise duty for the
assembler of vehicle on import of unassembled
parts and on sale of the manufactured vehicle
thereon
8 100% exemption of excise duty in
vehicle run by electricity
Removed.
 Changes in Rate
The Excise duties on Tobacco and Liquor have been increased by this Budget 2074. Apart from these
changes, there have not been any major changes in Excise Duty rates this Year. The changes in rates
are prescribed below:
SN Materials Units 74/75
(Rs)
73/74
(Rs)
1 Molasses(Sugarcane) Per Quintal 55 50
2 Paan masala without tobacco Per Kg 462 420
3 Flavored supari without tobacco Per Kg 171 155
4 Beer made up of barley Per Ltr 115 106
5 Beer without alcohol Per Ltr 7 -
6 Wine up to 12 % alcohol (Local Ingredients) Per Ltr 80 74
7 Cider made up of local ingredients Per Ltr 119 108

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8 Undenatured Ethanol Alcohol with more than 80% or more
volume alcohol power
Per Ltr 55 50
9 Rectified spirit used as raw material to liquor containing 80%
or more volume alcohol power
Per Ltr 55 50
10 ENA (Extra Neutral Alcohol) Per Ltr 58 50
11 Denatured Spirit (80% to 99% alcohol) Per Ltr 12 10
12 Raw material and Cardials (Spirit also) used for wine, brandy,
whisky and vodka
Per Ltr 127 115
13 Liquor with 48.5% alcohol Per Ltr 1,003 912
14 Liquor with 42.8% alcohol Per Ltr 748 680
15 Liquor with 39.94% alcohol Per Ltr 697 634
16 Cigarette without filter Per M 374 346
17 Cigarette up to 70 mm with filter Per M 859 795
18 Cigarette 70-75 mm with filter Per M 1,116 1,024
19 Cigarette 75-85 mm with filter Per M 1,456 1,336
20 Cigarette above 85 mm with filter Per M 2,055 1,868
21 Homogenized or reconstituted tobacco Per Kg 253 230
22 Cut tobacco not for retail sale, dust tobacco Per Kg 253 230
23 Printed plastics Per Rs 5% 0
24 Printed Plastics cellular other Per Rs 5% 0
25 Tank attached with chassis specially designed for Milk
transport
Per Rs 5% 0
26 Container truck attached with chassis Per Rs 5% 0
27 Specially prepared Bullet for liquefied petroleum gas (LPG)
transportation
Per Rs 5% 0
G. Customs
 Amendments in Customs
2(u)
Custom
Examiner
No definition “Custom Examiner” means Chief Custom Examination
Administrator, Chief Custom Examiner, or Custom
Examiner and it also includes officer appointed by DG for
post clearance examination under section 34.
23 A
Central
Examination
system can be
implemented
No Provision Notwithstanding anything mentioned in this chapter,
Department can make necessary arrangement for central
examination of goods declared in custom office as
prescribed.

Kandel & Associates
 Changes in Custom Duty Rates
There are some changes in the description of subheadings or addition/deletion of some items in the
headings by Finance Act 2074. Similarly, it there is additional provision on Point 21 of custom
schedule that has imposed certain restrictions on import/export through courier service by private
entity, which are:
Restriction on import through courier
 Not weighing more than 70 kg per packet
 Animal and their body parts.
 Plant and their parts.
 Any types of Jewellery.
 Precious and valuable stone/metal.
 Any other goods restricted to import by prevailing law.
Restriction on export through courier
 Goods and services attracting custom duty.
 Export made by bonded warehouse facility.
 As restricted by prevailing laws
Changes in custom for the import of LCD, Plasma, LED television.
Gross rate of 55% of amount included shall be charged as custom, excise and vat. Previously there is
the provision of charging duty as per the size (Inch) of the television so imported.
H. Other
 Audit not required
Small & medium size taxpayer carrying transaction of up to 1 crore need not required to get audit and
tax return attested by taxpayer is accepted (As per point no 404 of Budget Speech 2016).
 Yearly vehicle Tax
Private Vehicles Public Vehicles
Particulars 74/75
(Rs)
Particulars 74/75
(Rs)
Car, Jeep, Van, Micro Bus: Car, Jeep, Van, Micro Bus
Up to 1000 CC 19,000.00 Up to 1300 CC 8,000.00
1001-1500 CC 21,000.00 1301-2000 CC 9,000.00
1501-2000 CC 23,000.00 2001-2900 CC 11,000.00
2001-2500 CC 32,000.00 2901-4000 CC 13,000.00
2501-2900 CC 37,000.00 Above 4000 CC 15,000.00
Above 2900 CC 53,000.00
Dozer, Excavator, Loader, Roller,
Tripper, Crane
35,000.00 Dozer, Excavator, Loader, Roller,
Tripper, Crane
17,000.00
Mini Tipper 25,000.00 Mini Tipper 14,000.00

Kandel & Associates
Auto Rickshaw, 3-Wheeler & Tempo 5,000.00 Auto, 3-Wheeler, Tempo, Power Tiller
Auto Rickshaw, 3-Wheeler & Tempo
4,000.00
Tractor 4,000.00 Tractor 2,500.00
Power Tiller 3,000.00 Power Tiller 2,000.00
Mini Truck / Mini Bus 22,000.00 Mini Truck / Mini Bus 12,000.00
Truck / Bus 30,000.00 Truck / Bus 16,000.00
Motor Cycle:
Up to 125 CC 2,500 2,500.00
126 CC – 250 CC 4,000 4,000.00
251 CC – 400 CC 8,000 8,000.00
Above 400 CC 15,000 15,000.00
 Road Construction and Improvement Fee:
At the time of registration of vehicle
Particulars Fee
Car, Jeep, Van, Microbus, Bus, Truck, Tipper, Mini-bus, Mini Truck, Mini tipper 7% of Price
Motorbike up to 125 CC 10,000
Motorbike up to 126-250 CC 12,000
Motorbike up to 251-400 CC 15,000
Motorbike above 400 CC 20,000
Note:
Cooperatives & Companies established as public transport operator intended to purchase at least 5 buses of
40 seaters or more for the specified purpose, then no road construction & improvement fee levied.
 House & Land Registration Fee
Particulars Metropolitan
Area
Sub Metropolitan
Area
Municipality
Area
Rural
Municipalit
y Area
Land 5% 4.50% 4% 2%
Flat in a Housing Project 4% 3% 2% 1%
Land & Building in a housing
project
5% 4.50% 4% 2%
Note:
(25% (35% for single women) rebate if the land is registered in the name of women, minor & men aged
above 70 years)
 Deduction for General Insurance Business
Following Expenses have been made allowed as deductible expenses for General Insurance Business:
a. 50 % of Net Insurance Premium provided for Unexpired Risk and
b. 115 % of outstanding claim at year end as per Insurance Act/Rules.

Kandel & Associates
Disclaimer:
This document is specially prepared for the internal use of staff at Kandel & Associates and for the use of
clients served during the course of assignment conducted by it. Professional advice should be obtained before
acting on any information contained herein.
For more information Contact us:
Kandel & Associates
Tel no : 01-4232213
Email : kandelnassociates@gmail.com
Address : 4th
Floor- Madhavi Tower
Putalisadak, Kathmandu
Nepal.

Nepal Budget Highlight 2074/75 (2017/18) Tax Rates

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