The Government of Nepal has unveiled its comprehensive budget highlights and taxation structural changes for the Fiscal Year 2083-84. Formulated via the latest Finance Bill, these updates introduce significant alterations to personal income tax brackets, corporate compliances, customs duties, and an expansive suite of time-bound tax amnesties designed to regularize non-compliant taxpayers. For individual taxpayers, businesses, and expatriates, understanding these statutory shifts is critical to maintaining accurate compliance and optimizing tax liabilities.
1. Revised Income Tax Slab Rates (Schedule 1)
The tax brackets for resident natural persons have undergone a major restructuring for both single and couple assessment tracks, expanding lower-rate brackets to provide relief to mid-income earners.
For Resident Natural Persons Opting Single Assessment
- Up to Rs. 10,00,000: 1% Social Security Tax (SST)*
- Above Rs. 10,00,000 Up to 15,00,000: 10%
- Above Rs. 15,00,000 Up to 25,00,000: 20%
- Above Rs. 25,00,000 Up to 40,00,000: 27%
- Above Rs. 40,00,000: 29%
For Resident Natural Persons Opting Couple Assessment
- Up to Rs. 10,00,000: 1% Social Security Tax (SST)*
- Above Rs. 10,00,000 Up to 15,00,000: 10%
- Above Rs. 15,00,000 Up to 25,00,000: 20%
- Above Rs. 25,00,000 Up to 40,00,000: 27%
- Above Rs. 40,00,000: 29%
Note on 1% SST: The 1% Social Security Tax does not apply to sole proprietorship taxpayers (Business Income), pension income, income from contribution-based pension funds, or individuals contributing directly to the Social Security Fund (SSF).
2. Deductions, Reductions, and Tax Rebates
Taxpayers can claim specific deductions from their taxable employment income under the following thresholds:
| Deductions & Rebates | Maximum Eligible Limit / Condition |
| Remote Area Allowance | Deduction based on region: Area “Ka” Rs. 50,000; Area “Kha” Rs. 40,000; Area “Ga” Rs. 30,000; Area “Gha” Rs. 20,000; Area “Nga” Rs. 10,000. |
| Pension Income Allowance | Lower of an additional 25% of the basic exemption or the Actual Pension amount. |
| Handicapped Allowance | An additional 50% basic exemption is allowed for physically disabled individuals. |
| Life Insurance Premium | Lower of actual payment or NPR 40,000. |
| Health Insurance Premium | Lower of actual premium or NPR 20,000 (Paid for self, spouse, and children). |
| Private Building Insurance | Lower of actual payment or NPR 10,000 for an owned building with a resident insurer. |
| Approved Retirement Fund | Lower of: $1/3$ of assessable income, NPR 500,000, or actual contribution. |
| Education Fee Credit | Lower of 25% of annual tuition fees paid to a resident person for children’s education or NPR 25,000. |
| Female Tax Credit | A 10% tax credit on total tax liability is granted if the source of income is exclusively from employment. |
3. Capital Gains Tax (CGT) Adjustments
The tax framework on the disposal of listed shares and real estate (Non-Business Chargeable Assets) has seen targeted revisions:
- Listed Shares (Held > 365 Days): Increased to 7.5% (Old Rate: 5%).
- Listed Shares (Held $\le$ 365 Days): Maintained at 10% (Old Rate: 7.5%).
- Land & Building (Ownership > 5 Years): 7.5% (Old Rate: 5%).
- Land & Building (Ownership $\le$ 5 Years): 10% (Old Rate: 7.5%).
- Involuntary Government Acquisition: Reduced to 2.5% advance tax for land/buildings acquired due to compulsory acquisition by Government Decision. Free-of-cost transfers to Government bodies are completely exempt from CGT.
4. Key Tax Amnesty & Relief Packages
The Finance Bill 2083 introduces a crucial grace window ending in Poush End, 2083 BS, allowing taxpayers to clear historical discrepancies with minimal or zero penalties.
Income Tax & Unregistered Taxpayers (Section 40)
- Amnesty for Unregistered Persons: Individuals or entities operating without a PAN can register, submit income returns for FY 2079/80 through FY 2082/83, and pay the core tax by Poush End, 2083 BS to get all past fees, penalties, and interest completely waived. All years prior to 2079/80 will be legally cleared.
- Relief for Taxpayers with Arrears: Existing PAN holders with outstanding tax assessments can clear their principal liability plus a 1% additional charge by Poush End, 2083 BS to enjoy a 100% waiver on accrued interest and penalty fees.
Value Added Tax (VAT) & Excise Adjustments (Section 41 & 43)
- VAT Return Defaulters: Businesses that missed filing or depositing VAT on vatable transactions up to Chaitra End 2082 BS can settle their core VAT plus a 1% surcharge by Poush End, 2083 BS to completely waive accumulated fines and interest.
- Special Industry Waivers: Full VAT and penalty waivers have been applied to insurance agents who failed to collect VAT up to FY 2082/83, gold/diamond jewelry businesses struggling with historical uncollected luxury VAT, and outstanding historical VAT on milk-made paneer.
- Excise License Renewal: Expired excise licenses can be renewed without penalty if the operator clears the renewal fee for FY 2082/83 by Ashwin End, 2083 BS. Failure to meet this timeline results in automatic system cancellation.
5. New Indirect Taxes and Regulatory Fees
To fund social, educational, and environmental goals, the government has created several targeted levies:
- Education Equity Fee: Privately operated educational institutions must levy a 3% fee on all student tuition fees, remitting it to the Inland Revenue Office on a four-monthly basis within 25 days of the period’s end. Delays incur a 15% per annum interest charge.
- Education Service Fee: Commercial banks will collect a 3% fee on all foreign exchange facilities issued to students moving abroad for higher education.
- Health Equity Fee: Private healthcare facilities must collect a 3% fee on all service invoices, following the same four-monthly remittance schedule as the educational sector.
- Luxury Tax & Green Tax: Five-star hotels and luxury resorts must collect a 2% Luxury Fee at the point of service. Simultaneously, a Green Tax of Rs. 10 per liter is now levied on the import of Petrol and High-Speed Diesel.
- Skills Promotion Fee: A 0.5% fee is now applicable on the retail sale of gold, silver, ornaments, and precious metal goods to end consumers within Nepal.
6. Strategic Legal and Corporate Adjustments
- Cash Deductions Limit (Section 21): For businesses with an annual turnover exceeding Rs. 20 Lakhs, the ceiling for deductible individual cash payments has been drastically tightened to Rs. 5,000 at one time (previously Rs. 50,000). Payments exceeding this limit will not be allowed as deductible business expenditures.
- Ownership Shifts (Section 57): The strict 50% or more ownership change rule within a rolling three-year window will no longer trigger asset disposal penalties under three specific carve-outs: Startups/venture capital funding expansions, passing of assets to a legal heir due to death, or tiered adjustments between internal resident entities.
- Advance Pricing Agreements (APA) & Safe Harbor (Section 33Ka & 33Kha): IT service exporters with annual turnovers under Rs. 1 Billion can opt for a Safe Harbor rule, provided they maintain an operating profit margin of at least 15% on operational costs. This locks in their transfer price at arm’s length for up to 5 consecutive income years.
Disclaimer: This document is drafted for informational and educational purposes based on the budget documentation compiled by K.S.P. & Associates, Chartered Accountants. Taxpayers are strongly advised to consult certified tax professionals before finalizing structural corporate closures or applying for specific litigation withdrawals under the amnesty provisions.