Income Tax Act 2058 acts for regulating all the tax-related matters in Nepal.
Revenue
- Tax Revenue – Direct Tax(Income Tax) and Indirect Tax
- Non Tax Revenue
Objectives of the income tax 2058
- To confine all the matters of income in a single law
- To develop the taxpayer-friendly environment
- To integrate the Nepalese tax system with foreign practice
- To widen the tax scope
- To protect the rights of the taxpayer, define the responsibility of the admin
- To harmonize the tax system, rate, and facilities
- To collect revenue
Features of the income tax act 2058
- use of scheduler and global tax system
- Focuses on self-assignment tax system/method
- Specialization in tax-rates – use of different tax rates in different fields
- Carious tax related facilities or concessions are outlined
- Simplification to depreciation calculation
- Taxing to capital gain
- Provision of loss-set-off and carrying forward
- Measures to control tax evasion
- Less discriminatory power to tax administrator
- Separate provision for baking and insurance business
- It defines the base of income tax
- Taxpayers are categorized as a resident and a non-resident person
- Administrative review and appeal
Tax Exemption Organizations Defined by Income Tax 2058
- Social religious, education, charitable organizations (registered with the non-profit motive)
- Registered as a tax-exempt organization in the Inland Revenue Department (IRD)
- An amateur sport association
- Political parties registered in the election commission (No need to register in Inland Revenue Department (IRD)
- Microfinance that carries social motives
- Nepal government and its bodies like municipality, District Coordination Committee (DCC), etc.
- Nepal Rastra Bank
Bases of Income Taxation
- An income year is a fiscal year (Shrawan 1 – Asar Last)
- Tax payer – resident, and non-resident
- Source of income – Employment remuneration, Business, Investment, Windfall Gain
- Tax accounting – cash and accrual
Resident Person and Non-Resident Person
- Resident
——- In Case of Natural Person ———
- Normal place of abode in Nepal
- Who lives at least 183 days in Nepal in the income year
- Government officials working in Nepal and posted abroad
——- In Case of Company ———
- Incorporated under the provision of the law of Nepal
- Effective management in Nepal during the income year
- Partnership firm/company (like joint venture)
——- In Case of Trust ———
- Established in Nepal under the provision of law
- Trustee who is a resident of Nepal
——- Other ———
- Foreign government and political sub-divisions of foreign government established in Nepal
- An entity established under the provision of the treaty
- A foreign permanent establishment of non-residence situated in Nepal
All the natural person and artificial person except above-mentioned criteria are known as non-resident of Nepal.
Income Tax Rate in Nepal
Income Tax rates in Nepal for 2076/2077 (Individual and Couple). The tax threshold slabs for the Fiscal year 2076/77 is increased after the budget speech 2076/77. Tax rates for resident person non-resident person are given below.
Particulars(slabs) | Taxable Amount (For individual) | Rate (For individual) | Taxable Amount (For Couple) | Rate (For Couple) |
---|---|---|---|---|
1 st Slab | Up to 4,00,000 | 1 % (SST) | Up to 4,50,000 | 1 % (SST) |
2 nd Slab | Up to 5,00,000 | 10 % (SST) | Up to 5,50,000 | 10 % (SST) |
3 rd Slab | Up to 7,00,000 | 20 % (SST) | Up to 7,50,000 | 20 % (SST) |
4 th Slab | Up to 20,00,000 | 30 % (SST) | Up to 20,00,000 | 30 % (SST) |
5th Slab | Above 20,00,000 | 36% (SST) (+20% of previous rate, which is 6) | Above 20,00,000 | 36 % (SST) (+20% of previous rate, which is 6) |
SST – Social Security Tax
25% for non-resident
No tax for Windfall gain in literature, sports, education (national & international) up to 500,000 else 25% tax.
Provision for a deduction for income from business (Section 13-21)
- Depreciation
- Pollution control
- General Expense
- Trading stock
- R&D
- Donation
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