Section | Existing Provisions | New Provision |
|---|---|---|
| 2(Kha1) | No Provision | 'International Transaction' means a transaction entered into by any person with at least one non resident person involving goods, services, finance, or intangible property; and the term shall also denote any other transaction that affects income, expenditure, assets, or liabilities |
| 2KaNa(4) | No Provision | For the purposes of Sections 33, 33Ka, and 33Kha: An entity that, alone or together with related persons or associate entities or persons related to such associate entities, controls or benefits from 30% or more of the income, capital, or voting rights of any entity; (b) Any entity that receives a loan amount equal to or exceeding 50% of the total assets of a person providing the loan. (c) Any entity that earns income while being substantially or wholly dependent on another person's intellectual property rights, technical knowledge, or commercial rights. (d) Any entity that supplies to another person 90% or more of the raw materials or consumable goods required by that person. |
| 2(KaNa1) | “Adjusted Taxable Income" means the taxable income of any person for any income year calculated without reducing any amount under Sections 12, 12Ka, 12Kha, and 12Ga, or any deductions under Sub-section (2) of Section 14 or under Sections 17 or 18. | “Adjusted Taxable Income" means the taxable income of any person for any income year calculated without reducing any amount under Sections 12, 12Ka, 12Kha, 12Ga and 12Gha or any deductions under Sub-section (2) of Section 14 or under Sections 17 or 18. |
| 2(KaBha1) | No Provision | “Safe Harbor Rule" means the provision referred to in Section 33ka, whereby the transfer price shall be accepted as the arm’s length price prevailing under normal market conditions. |
| 5 | Taxable income and classification of income headings: The taxable income of any person in any income year shall be equal to the amount computed by subtracting the amount, if any, claimed pursuant to Sections 12, 12Ka, 12Kha, 12Ga, 63 or all these Sections from the grand total amount of assessable income of each of the following income headings in that income year: (a) Business, (b) Employment, (c) Investment, and (d) Windfall gain. | Taxable income and classification of income headings: The taxable income of any person in any income year shall be equal to the amount computed by subtracting the amount, if any, claimed pursuant to Sections 12, 12Ka, 12Kha, 12Ga, 12Gha, 63 or all these Sections from the grand total amount of assessable income of each of the following income headings in that income year: (a) Business, (b) Employment, (c) Investment, and (d) Windfall gain. |
| 8(3)(Nga) | No Provision | An amount equal to the sweat equity shares received as remuneration by being employed in the information technology industry. |
| 10(Jha1) | No Provision | Income derived from the transfer of land or private building owned by a natural person to the Government of Nepal, Provincial Government, or Local Level without consideration. |
| 10(Jha2) | No Provision | Interest income derived from loan investment made in Nepal by a financial institution established with full ownership of a foreign government, for non profit purposes. |
| 10(Jha3) | No Provision | Amounts earned by Drinking Water and Sanitation Consumer Organizations registered under the Water Resources Act, 2049, in accordance with their objectives. |
| 10(Tha1) | No Provision | Amount earned by a university established and operating in Nepal in accordance with its objectives. |
| 11(2Ka) | No tax shall be levied in interest income up to twenty-five thousand rupees per year if it is generated from the deposits in a micro-financial institution, rural development bank, postal saving bank operated in rural municipality and cooperative pursuant to sub-section (2). | No tax shall be levied in interest income up to twenty-five thousand rupees per year if it is generated from the deposits in a micro-financial institution, rural development bank, postal saving bank operated in rural municipality and cooperative pursuant to sub-section (2). Provided that, if the interest amount exceeds twenty-five thousand rupees, tax shall be levied on such excess interest amount. |
| 11(3Wa) | No Provision | A cinema hall established in areas other than Metropolitan Cities and Sub-Metropolitan Cities shall be entitled to a tax exemption for up to ten years from the date of commencement of its commercial business. |
| 11(6) | (Ka)”Agricultural business” means the business of producing crops from public or private land, or the business of obtaining rent or crops from tenant using land. | (Ka)”Agricultural business” means the business of crops, horticulture, livestock rearing, fishery, and bee-keeping. |
| 12(2) | Notwithstanding anything contained in Sub-section (1), the expenditure deductible in any income year under that Sub-section shall not exceed one lakh rupees or 5% of the taxable income. | Notwithstanding anything contained in Sub-section (1), the expenditure deductible in any income year under that Sub-section shall not exceed three lakh rupees or 5% of the taxable income. |
| 12Gha | No Provision | Expenses incurred on Corporate Social Responsibility (CSR): Any person who incurs expenditure for the purpose of fulfilling corporate social responsibility obligations as required by prevailing law in any income year may deduct such amount when computing taxable income for that year. Provided that, such amount shall not exceed 1% of the total taxable income of that income year. |
| 21(2) | If a person, whose annual turnover is more than twenty lakh rupees in any income year, makes a cash payment of more than fifty thousand rupees at a time in that income year except in the following circumstances, he shall not be allowed to make that deduction: | If a person, whose annual turnover is more than twenty lakh rupees in any income year, makes a cash payment of more than twenty-five thousand rupees at a time in that income year except in the following circumstances, he shall not be allowed to make that deduction: |
| 21(3) | Capital expenses means the following expenses: (1) Expenses incurred in feasibility study, exploration and development of natural resources, (2) Expenses incurred in acquiring any property with useful life for more than twelve months, or (3) Expenses in disposing a liability. | Capital expenses means the expenses other than those incurred on share or debenture issuance, as follows. (1) Expenses incurred in feasibility study, exploration and development of natural resources, (2) Expenses incurred in acquiring any property with useful life for more than twelve months, or (3) Expenses in disposing a liability. |
| 33Ka | No Provision | Special Provision Relating to Safe Harbour Rule: 1. Notwithstanding anything in Section 33, a person with annual turnover up to one billion rupees who meets the conditions of sub-section (3) may opt for the Safe Harbour Rule for determining the arm's length price of controlled transactions. 2. Where a person has opted for the Safe Harbour Rule under Sub section (1) and submitted the income return, the Department shall accept the transfer price as the arm’s length price prevailing under normal market conditions. 3. To opt for Safe Harbour, any of the following conditions must be met: (a) Maintaining at least 15% operating profit margin in the operating costs of IT service exports; (b) Interest rate on inter-group loans ( in foreign currency) maintained at the specified reference rate plus 200 to 400 basis points; or (c) For low value addition services as specified by the Department, a markup of no more than 5% on total cost. 4. Once the Safe Harbour Rule option is chosen, it shall remain in effect for five consecutive income years unless there is a material change in the nature and circumstances of the transaction. 5. The procedure for implementing the Safe Harbour Rule shall be as determined by the Department. |
| 33Kha | No Provision | Advance Pricing Agreement: 1. Notwithstanding anything elsewhere in this Act, the Department may enter into an Advance Pricing Agreement (APA) with any taxpayer regarding the basis and method for determining the arm's length price of international transactions between related persons. 2. Under the Mutual Agreement Procedure contained in a double taxation avoidance agreement made under Section 73 with a foreign country, Nepal's competent authority may conclude bilateral or multilateral agreements in coordination with the competent authority of the relevant foreign country. 3. The agreement under sub sections 1 and 2 shall specify the methodology, comparables, and other necessary conditions for determining the price of international transactions. The price determined in accordance with the agreed method and process shall be treated as the arm's length price for the purposes of this Act. 4. An agreement under sub sections 1 and 2 shall be valid for the period specified in the agreement, which shall not exceed five consecutive years. 5. The agreement under Sub sections (1) and (2) may include rollback provisions, whereby the agreement shall also apply to international transactions undertaken in up to four preceding income years. 6. Any agreement entered into under this Section shall be binding on both parties. Provided that, if there is a material change in the conditions or legal provisions referred to in the agreement, such agreement shall not remain binding. 7. If a person is found to have entered into an agreement through fraud, misrepresentation, or false statements, the Department may declare the agreement void from inception and must notify to the concerned person. 8. The fee payable by a person wishing to enter into an agreement shall be as prescribed. 9. The application format, documents, renewal procedures, and other processes for an APA shall be as specified by the Department. |
| 47Ka | Special Provision Relating To Disposal Owing To Merger Or Acquisition Of Business: 1. In the case of merger or acquisition of entities of the same nature carrying on banking and financial business or insurance business, the provisions of clauses (Ka), (Kha), (Gha), (Nga), (Cha) and (Chha) of sub-section (2) of Section 57 and sub-section (3) of the same Section shall not apply. Provided that if there remains any loss of the entity not in existence due to merger which could not be deducted, such loss shall be deducted on pro rata in the upcoming seven years. If the entity so deducting the loss in equal instalment is re-divided prior to the deduction of the whole loss, tax shall be paid in amount deducted for such loss at the rate of tax prevailing in the fiscal year in which merger or acquisition took place. 2. If the property and liability are disposed upon the merger of the entities pursuant to sub-section (1), it shall be as follows: (A) In the case of stock-in-trade and business assets, (1) Amount equal to net expenses for property immediately before the disposal shall be deemed to have been received by such person for such disposal, and (2) Amount equal to that mentioned in sub-clause (1) shall be deemed to have been spent by the person acquiring property. (B) In case of disposal of depreciable property, (1) Amount equal to the remaining value of the group of descending system pursuant to Section 4 of Schedule-4 at the time of disposal shall be deemed to have been received for such disposal, and (2) Amount equal to that mentioned in sub-clause (1) shall be deemed to have been spent by the person acquiring property. (C) In case of disposal of liability, (1) Amount equal to the market value immediately before the disposal or to the net income of liability, whichever is lesser, shall be deemed to have been spent by that person for such disposal, and (2) Amount equal to that mentioned in sub-clause (1) shall be deemed to have been received by the person bearing liability as result of bearing such liability. (D) The entity amalgamating the business or the entity being amalgamated shall, in computing the cost of property and liability, compute only the cost of the property and liability maintained at the time of operating such amalgamated business (before merger or acquisition) by the amalgamated entity pursuant to clauses (Ka), (Kha) and (Ga). 3. In the case of additional lump sum payment to be made for the purpose of granting retirement in a group to the employees working in the entity disposed upon being amalgamated or the entity post the merger pursuant to sub-section (1), tax deduction shall be made from the payment by giving exemption of 50% of the rate by which tax has to be deducted from the retirement payment (except the payment to be made through retirement fund or as mentioned in the terms of conditions of the employee). 4. If the shareholders existing in the entity being disposed after amalgamation pursuant to sub-section (1) dispose their shares through sale within two years of such amalgamation, no capital gain tax shall be levied in the gain earned from such disposed shares. 5. No tax shall be levied in dividends distributed to the shareholders existing at the time of amalgamation of the entity pursuant to sub-section (1) within two years of such amalgamation. 6. The entity of same category willing to be amalgamated pursuant to sub-section (1) shall provide the letter of intent for amalgamation to the Inland Revenue Department not later than the end of Ashad 2079 (14 July 2022). 7. The entity submitting the letter of intent for amalgamation pursuant to sub-section (6) to be amalgamated pursuant to sub-section (1) shall complete the procedure not later than the end of Ashad 2080 (14 July 2023). 8. The entities that are amalgamated after the commencement of this Section but have not utilized the facility referred to in this Section may also utilize the facility accordingly. 9. The provision of this Section shall not be deemed to be applicable to an entity that does not submit the letter of intent within the time specified in sub-section (6) and to an entity that does not complete the process of amalgamation within the date mentioned in sub-section (7). | Deleted |
| 57(1) | If the ownership of any entity changes by fifty per cent or more as compared to its ownership until before the last three years, the entity shall be deemed to have disposed the property under its ownership or the liability incurred by it. Provided that, the provision of this sub section will not apply in cases where the number of shares and capital of existing shareholders and partners remain unchanged in venture capital, and private equity funds, while new shareholders and partners are added, resulting in an increase in capital. | If the ownership of any entity changes by fifty per cent or more as compared to its ownership until before the last three years, the entity shall be deemed to have disposed the property under its ownership or the liability incurred by it. Provided that, the provision of this sub section will not apply in cases where the number of shares and capital of existing shareholders and partners remain unchanged in venture capital, and private equity funds, while new shareholders and partners are added, resulting in an increase in capital or in the case where, due to the death of a shareholder of an entity, the ownership held in such entity has been involuntarily transferred to the legal heir, or in the case where, due to change in ownership of a resident entity, the ownership held in such entity has been transferred to another resident entity for the same reason, this Section shall not be applicable. |
| 59(1Ka) | Amount up to 5% of the amount of loan due to be recovered kept in the risk bearing fund by the person operating banking business and amount managed for non-banking property shall be deducted as expenses, subject to the standards prescribed by the Nepal Rastra Bank. | Amount up to 5% of the amount of loan due to be recovered kept in the risk bearing fund by the person operating banking business or conducting hire-purchase transactions with approval from Nepal Rastra Bank and amount managed for non-banking property shall be deducted as expenses, subject to the standards prescribed by the Nepal Rastra Bank. |
| 72(2) | The Government of Nepal may, by a notification in the Nepal Gazette, establish large taxpayer office, medium level taxpayer office, inland revenue office or taxpayer service offices under the Department and prescribe their working areas, in order to render assistance in fulfilling the responsibility of the Department mentioned in sub-section (1). The offices of which working areas have been so specified shall be deemed as organs of the Department. | The Government of Nepal may, by a notification in the Nepal Gazette, establish large taxpayer office, medium level taxpayer office or inland revenue office under the Department and prescribe their working areas, in order to render assistance in fulfilling the responsibility of the Department mentioned in sub-section (1). The offices of which working areas have been so specified shall be deemed as organs of the Department. |
| 75(1Ka) | No Provision | The interpretation made by the Department under sub-section (1) shall be final. |
| 81(1)(Ka) | Necessary information and documents supporting the income returns or any other documents required to be submitted to the Department pursuant to this Act, | Necessary information and documents including invoices supporting the income returns or any other documents required to be submitted to the Department pursuant to this Act, |
| 81(4) | The Department may, upon prescribing the standards and procedures, give approval to any person to issue invoices through electronic means and to keep the documents required to be kept under sub-section (1) through electronic means. | The Department may, upon prescribing the standards and procedures, may make necessary arrangements for maintaining through electronic means and to keep the documents required to be kept under sub-section (1) through electronic means. |
| 81(5) | Notwithstanding anything contained in sub-section (4), the Department may, by publishing a notice, order the taxpayers specified in such notice to compulsorily issue invoices through electronic means and to integrate such electronic means into the Department's Central Billing Monitoring System (CBMS). | Notwithstanding anything in sub-section (4), the Department may, by publishing a notice, order specified taxpayers to mandatorily issue electronic invoices linked to the Department's Central Billing Monitoring System (CBMS), or to issue electronic invoices using the billing system provided by the Department. |
| 81(6) | The Department shall formulate and implement procedures regarding the security and reliability of software or devices used to issue invoices through electronic means. Such procedures must be complied with by the concerned manufacturer, distributor, and user. | The Department shall formulate and implement procedures regarding the security and reliability of software or devices used to issue invoices through electronic means. |
| 82Ka | No Provision | Power to Obtain Information or Details: For the implementation of this Act and within the limits of prevailing law, the Department may obtain through electronic means financial transaction related information or details from any person located in Nepal including that person's own records, data, information, or records of their customers, employees, service recipients, members, or any other person maintaining such data. |
| 88(1) | When making payment by a resident person for interest, a natural resource payment, rent, royalty, service charge, commission, sales bonus, retirement payment and other any consideration having source in Nepal, and in making payment of amount of any retirement payment, the person shall withhold tax at the rate of 15% of the total amount of payment. | When making payment by a resident person for interest, a natural resource payment, rent, royalty, service charge, commission, sales bonus, and other any consideration having source in Nepal, and in making payment of amount of any retirement payment, the person shall withhold tax at the rate of 15% of the total amount of payment. |
| 88(1)(14) | No Provision | Service fees or commissions paid to resident natural persons who are insurance agents, at the rate of 20%. |
| 88Ka(1) | Tax shall be withheld at the rate of 25% in making a payment for a windfall gain. Provided that the Government of Nepal may, by a notification in the Nepal Gazette, provide exemption from levying wind-fall gain tax on national and international award for contribution made to literature, art, culture, sports, journalism, science, technology and public administration. | Tax shall be withheld at the rate of 25% in making a payment for a windfall gain. Provided that the Government of Nepal may, by a notification in the Nepal Gazette, provide exemption from levying wind-fall gain tax on national and international award for contribution made to literature, art, culture, sports, journalism, science, science, technology, agriculture and public administration. |
| 88Ka(2) | Notwithstanding anything contained in sub-section (1), no tax shall be levied on national and international award of up to five hundred thousand rupees for contribution made to literature, art, culture, sports, journalism, science, technology and public administration. | Notwithstanding anything contained in sub-section (1), no tax shall be levied on national and international award of up to five hundred thousand rupees for contribution made to literature, art, culture, sports, journalism, science, technology, agriculture and public administration. |
| 89(3Ka) | Tax shall be withheld at the rate of 1.5% from payment of amount exceeding fifty lakh rupees for a work to be performed through consumers’ committee. | Deleted |
| 92(1)(Yna1) | No Provision | Gain amount of a resident natural person and a non-resident person who does not wish to submit an income statement pursuant to Sub-sections (2) and (5) of Section 95Ka, payment in foreign currency pursuant to Sub-sections (6Kha), (6Ga) and (6Gha), and payment for services pursuant to Sub-section (6Nga) |
| 92(1)(Yna2) | No Provision | Service fees or commissions paid by resident natural persons to insurance agents. |
| 95Ka(2)(Ka) | In respect of gain derived from the disposal of interest of an entity listed in the Securities Board of Nepal, at the rate of 5 percent on gain amount in case of natural resident person having ownership of more than 365 days; at the rate of 7.5 percent on gain amount in case of natural person having ownership of 365 days or less; at the rate of 10 percent in case of resident entity; and at the rate of 25 percent on gain amount in other cases, by the entity that deals in securities exchange market. | In respect of gain derived from the disposal of interest of an entity listed in the Securities Board of Nepal, at the rate of 7.5 percent on gain amount in case of natural resident person having ownership of more than 365 days; at the rate of 10 percent on gain amount in case of natural person having ownership of 365 days or less; at the rate of 10 percent in case of resident entity; and at the rate of 25 percent on gain amount in other cases, by the entity that deals in securities exchange market. |
| 95Ka(5) | The Land Revenue Office shall collect advance tax as follows at the time of registration on capital gain earned from the disposal of land or private building of any individual: (Ka) If the disposed non-business asset (land and building) has the ownership of five years or more, at the rate of 5%, (Kha) If the disposed non-business chargeable asset (land and building) has the ownership of less than five years, at the rate of 7.5%. | The registering entity at the time of registration shall collect advance tax as follows at the time of registration on capital gain earned from the disposal of land or private building of any individual: (Ka) If the disposed non-business chargeable asset (land and building) has ownership of five years or more, at the rate of 7.5%, (Ka1) In the case of involuntary disposal of non-business chargeable asset (land and building) due to compulsory acquisition by Government of Nepal decision, at the rate of 2.5%. (Kha) If the disposed non-business chargeable asset (land and building) has the ownership of less than five years, at the rate of 10%. |
| 95Ka(5Ka) | No Provision | Notwithstanding anything in sub-section (5), no capital gains tax shall be collected when a natural person voluntarily transfers their own land or private building to the Government of Nepal, Provincial Government, or Local Government. |
| 95Ka(6) | Except as provided in Sub-section (5), where land or a building owned by any other person is disposed of, the Land Revenue Office at the time of registration shall collect advance tax at the rate of 1.5% of the disposal value. | Except as provided in Sub-section (5), where land or a building owned by any other person is disposed of, the registering entity at the time of registration shall collect advance tax at the rate of 1.5% of the disposal value. |
| 95Ka(6Cha) | No Provision | A resident ride-sharing service operator shall withhold advance tax at the rate of 1% on amounts paid to natural persons providing services through its platform |
| 97(1) | Unless the Department issues a written order or publishes a public notice requiring it, the following persons are not required to submit an income tax return for any income year under Section 96: (Ka) A person who has no tax payable for the year under section 3(ka). (Kha) Any person referred to in Section 3(Ga) for that income year. (Ga) Any resident natural person to whom Section 4(3) applies for that income year. (Ga1) Any resident natural person whose income for that income year consists only of the income mentioned in Sections 95Ka(6Kha), 95Ka(6Ga), and 95Ka(6Gha). (Gha) A natural person, other than a sole proprietorship vehicle owner required to pay tax under Section 1(13) of Schedule 1. (Nga) A natural person whose income consists solely of gains from the disposal of non-business taxable assets and who does not wish to file an income tax return. | Notwithstanding anything in Section 96, the following persons are not required to file an income tax return: (Ka) A person who has no tax payable for the year under section 3(ka). (Kha) Any person referred to in Section 3(Ga) for that income year. (Ga) Any resident natural person to whom Section 4(3) applies in that income year; (Gha) A natural person, other than a sole proprietorship vehicle owner required to pay tax under Section 1(13) of Schedule 1. (Nga) Persons specified by the Department. Provided that the Department may, by written order or public notice, require any such person to file an income return. |
| 101(3) | The Department shall, in assessing the tax pursuant to Subsection (1) or (2), complete assessment within four years from the following date; | The Department shall, in assessing the tax pursuant to Subsection (1) or (2), complete assessment within three years from the following date; |
| 113(4) | The person who makes an application pursuant to Sub-section (3) has to make such application within two years from the latest date out of the following dates. In cases where an application is not made within that time-limit, the amount referred to in Sub-section (1) shall not be refunded; | The person who makes an application pursuant to Sub-section (3) has to make such application within five years from the latest date out of the following dates. In cases where an application is not made within that time-limit, the amount referred to in Sub-section (1) shall not be refunded; |
| 119Ka | Except where otherwise provided in this Act, a person who does not comply with any provision of this Act or the rules framed under this Act shall be subject to a fee of not less than five thousand rupees and not more than twenty-five thousand rupees. | A taxpayer issuing electronic invoices under Section 81(4) who uses software capable of deleting or altering data shall be liable to a fee of five lakh rupees. Failure to comply with other provisions of the same section shall attract a fee of one lakh rupees. |