In this blog, we’ll discuss the latest updates on the Income Tax Rate in Nepal for fiscal year 2079/80.
So, are you a taxpayer in Nepal? Do you wonder how the current fiscal year’s tax rates have changed?
Read everything to know more about taxes related to income taxes for married, unmarried, non-residents, Corporate taxes, etc.
Income Tax Rate in Nepal for Unmarried Individuals
In Nepal, unmarried individuals are subject to income tax rates based on their annual income. The tax rates are progressive, which means that as the income increases, the tax rate also increases.
For annual income up to Rs. 5,00,000, the tax rate is 1%, and the maximum tax amount is Rs. 5,000. For income between Rs. 5,00,000 to Rs. 7,00,000, the tax rate is 10%, and the maximum tax amount is Rs. 25,000.
For income between Rs. 7,00,000 to Rs. 10,00,000, the tax rate is 20%, and the maximum tax amount is Rs. 85,000. For income between Rs. 10,00,000 to Rs. 20,00,000, the tax rate is 30%, and the maximum tax amount is Rs. 3,85,000.
For income exceeding Rs. 20,00,000, the tax rate is 36%, and the maximum tax amount is Rs. 3,85,000 plus an additional 20% charge on the tax rate of the fourth bracket, which is 30%, for the amount exceeding Rs. 20,00,000.
| Annual Income (Rs) | Tax Rate | Maximum Tax Amount (Rs) |
|---|---|---|
| Up to Rs. 5,00,000 | 1% | Rs. 5,000 |
| From Rs. 5,00,000 to 7,00,000 | 10% | Rs. 25,000 |
| From Rs. 7,00,000 to 10,00,000 | 20% | Rs. 85,000 |
| From Rs. 10,00,000 to 20,00,000 | 30% | Rs. 3,85,000 |
| More than Rs. 20,00,000 | 36% | Rs. 3,85,000 + Extra* |
Extra*: Individuals with an income of NPR 385,000 or higher will face an extra 20% charge on the tax rate of the 4th bracket, which is 36% for the amount exceeding NPR 2,000,000.
Income Tax Rate in Nepal for Married Couples
In Nepal, married couples are subject to income tax based on their annual income. The tax rate increases as the income bracket goes up, and the maximum tax amount also increases accordingly. Here is a breakdown of the income tax rate for married couples in Nepal:
- If the annual income is up to Rs. 6,00,000, the tax rate is 1%, and the maximum tax amount is Rs. 6,000.
- If the annual income is between Rs. 6,00,000 to Rs. 8,00,000, the tax rate is 10%, and the maximum tax amount is Rs. 26,000.
- If the annual income is between Rs. 8,00,000 to Rs. 11,00,000, the tax rate is 20%, and the maximum tax amount is Rs. 86,000.
- If the annual income is between Rs. 11,00,000 to Rs. 20,00,000, the tax rate is 30%, and the maximum tax amount is Rs. 356,000.
- If the annual income is more than Rs. 20,00,000, the tax rate is 36%, and the maximum tax amount is Rs. 2,70,000 plus an additional tax on the amount exceeding NPR 2,000,000. The additional tax is 20% of the amount exceeding NPR 2,000,000 and is charged under the 4th tax bracket of 36%.
| Annual Income (Rs) | Tax Rate | Maximum Tax Amount (Rs) |
|---|---|---|
| Up to Rs. 6,00,000 | 1% | Rs. 6,000 |
| From Rs. 6,00,000 to 8,00,000 | 10% | Rs. 26,000 |
| From Rs. 8,00,000 to 11,00,000 | 20% | Rs. 86,000 |
| From Rs. 11,00,000 to 20,00,000 | 30% | Rs. 356,000 |
| More than Rs. 20,00,000 | 36% | Rs. 2,70,000 + Extra* |
Extra*: Annual income above NPR 2,000,001, will be taxed at a rate of NPR 356,000 plus an additional 20% on the amount exceeding NPR 2,000,000, which is charged under the 4th tax bracket of 36%.
Corporate Income Tax in Nepal
| Business Type | Normal Tax Rate |
|---|---|
| Normal business | 25% |
| Special Industry under section 11 for whole year | 25% |
| Entities constructing and operating ropeway, cable car or sky bridge | 25% |
| Entities constructing and operating roads, bridges, tunnel, railway, and airports | 25% |
| Entities operating trolley bus or trams | 25% |
| Entities with export income from source in Nepal | 25% |
| Entities involved in construction or operation of public infrastructure and to be transferred to the GoN or involved in the construction of hydropower house and its generation and transmission | 25% |
| Banks and financial institutions (Commercial Banks, Development Banks and Finance Companies) | 30% |
| Entity carrying General insurance business (Nonlife Insurance) | 30% |
| Entity engaged in petroleum business under Nepal Petroleum Act, 2040 | 30% |
| Entity engaged in the business of cigarette, tobacco, cigar, chewing tobacco, pan masala, alcohol and beer | 30% |
| Entity engaged in Telecommunication and Internet service | 30% |
| Entity engaged in Money transfer | 30% |
| Entity engaged in Capital market business, Securities business, Merchant banking, Commodity futures market, Securities and Commodity broker | 30% |
Income Tax in Nepal for Non-Residents
Income tax in Nepal for non-residents is levied on the income they earn within the country.
Non-residents are individuals or businesses that do not have a permanent establishment in Nepal but earn income from sources within the country.
The tax rates for non-residents differ based on the nature of the income earned. For income earned from normal transactions, such as rental income or interest income, the tax rate is 25%.
For income earned providing shipping, air transport, or telecom services within the territory of Nepal, the tax rate is 5% if the income is earned by a non-resident individual and 2% if the income is earned by a non-resident company.
If a non-resident company has a permanent establishment in Nepal, any profit repatriated from that establishment is subject to a 5% tax rate.
| Income Source | Tax Rate |
|---|---|
| Income earned from normal transactions | 25% |
| Income earned providing shipping, air transport, or telecom services within the territory of Nepal | 5% |
| Income earned providing shipping, air transport or telecom services within the territory of Nepal | 2% |
| Repatriation of profit by Foreign Permanent Establishment | 5% |
Conclusion
Understanding the latest updates on the Income Tax Rate in Nepal is crucial for every taxpayer in the country.
Also, there are several deductions, exemptions, and incentives available for individuals and businesses, which can help them reduce their tax liability.
Stay informed about the latest updates on tax rates to ensure you comply with your tax obligations.