Income Tax Act 2058 | आयकर ऐन 2058

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income tax act on Nepal

Income Tax Act 2058 acts for regulating all the tax-related matters in Nepal.

Revenue

  1. Tax Revenue – Direct Tax(Income Tax) and Indirect Tax
  2. Non Tax Revenue

Objectives of the income tax 2058

  1. To confine all the matters of income in a single law
  2. To develop the taxpayer-friendly environment
  3. To integrate the Nepalese tax system with foreign practice
  4. To widen the tax scope
  5. To protect the rights of the taxpayer, define the responsibility of the admin
  6. To harmonize the tax system, rate, and facilities
  7. To collect revenue

Features of the income tax act 2058

  1. use of scheduler and global tax system
  2. Focuses on self-assignment tax system/method
  3. Specialization in tax-rates – use of different tax rates in different fields
  4. Carious tax related facilities or concessions are outlined
  5. Simplification to depreciation calculation
  6. Taxing to capital gain
  7. Provision of loss-set-off and carrying forward
  8. Measures to control tax evasion
  9. Less discriminatory power to tax administrator
  10. Separate provision for baking and insurance business
  11. It defines the base of income tax
  12. Taxpayers are categorized as a resident and a non-resident person
  13. Administrative review and appeal

Tax Exemption Organizations Defined by Income Tax 2058

  1. Social religious, education, charitable organizations (registered with the non-profit motive)
  2. Registered as a tax-exempt organization in the Inland Revenue Department (IRD)
  3. An amateur sport association
  4. Political parties registered in the election commission (No need to register in Inland Revenue Department (IRD)
  5. Microfinance that carries social motives
  6. Nepal government and its bodies like municipality, District Coordination Committee (DCC), etc.
  7. Nepal Rastra Bank

Bases of Income Taxation

  1. An income year is a fiscal year (Shrawan 1 – Asar Last)
  2. Tax payer – resident, and non-resident
  3. Source of income – Employment remuneration,  Business, Investment, Windfall Gain
  4. Tax accounting – cash and accrual

Resident Person and Non-Resident Person

  1. 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 SlabUp to 4,00,0001 % (SST)Up to 4,50,0001 % (SST)
2 nd SlabUp to 5,00,00010 % (SST)Up to 5,50,00010 % (SST)
3 rd SlabUp to 7,00,00020 % (SST)Up to 7,50,00020 % (SST)
4 th SlabUp to 20,00,00030 % (SST)Up to 20,00,00030 % (SST)
5th SlabAbove 20,00,00036% (SST)
(+20% of previous rate, which is 6)
Above 20,00,00036 % (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