The Income Tax Act, 2002 (2058) Nepal

The Income Tax Act, 2002 (2058) is one of the most important laws governing taxation in Nepal. Whether you’re starting a new company, running a business, or working as an individual taxpayer, understanding this act helps you stay compliant and avoid penalties.

What Is the Income Tax Act, 2002 (2058)?

The Income Tax Act, 2058 (B.S.), also known as the Income Tax Act, 2002 (A.D.), is the main law that regulates the collection of income tax in Nepal. It was introduced to replace the previous tax laws and to simplify and modernize the tax system in Nepal.

The Income Tax Act, 2002 (2058) Nepal: Download

Objectives of the Income Tax Act, 2002

The main objectives of the Income Tax Act are:

• To ensure a fair and transparent tax system
• To expand the tax base by covering all sources of income
• To increase government revenue for national development
• To establish a self-assessment system for taxpayers

Who Needs to Pay Income Tax in Nepal?

Under the Act, the following individuals and entities are required to pay income tax in Nepal:

• Individuals (Nepali citizens and residents)
• Companies registered in Nepal
• Partnerships and Firms
• Foreign companies and non-residents earning income from Nepal

What Are the Types of Taxable Income?

According to the Income Tax Act, 2002, the following are the major types of taxable income in Nepal:

1. Employment Income – Salaries, bonuses, allowances, etc.
2. Business Income – Profits from trade, commerce, or services
3. Investment Income – Interest, dividends, capital gains, rental income, etc.
4. Windfall Gains – Lotteries, awards, or any unexpected income

For a detailed explanation, check out our full blog post:
What Are the Types of Taxable Income in Nepal?

Tax Rates in Nepal (For Reference)

Here are some general income tax rates in Nepal as per the current fiscal year (subject to updates by the government):

For Individuals (Resident):

• Up to NPR 500,000 – 1%
• NPR 500,001 to NPR 700,000 – 10%
• NPR 700,001 to NPR 1,000,000 – 20%
• Above NPR 1,000,000 – 30%

For Companies:

• Normal Business – 25%
• Banks, Insurance, Telecom – 30%
• Special Industries or IT-based businesses may get tax concessions.

For a more detailed breakdown and latest updates on income tax rates for both individuals and corporate entities, check out our full guide here: Income Tax Rates in Nepal 2025: Corporate and Individual Taxation

Key Provisions of the Income Tax Act, 2058

• PAN Mandatory: All taxpayers must obtain a Permanent Account Number (PAN).
• Self-Assessment: Taxpayers must calculate and file their own tax returns.
• Withholding Tax: Certain payments like salaries, rent, or contract payments are subject to TDS (Tax Deducted at Source).
• Fines and Penalties: Non-compliance can lead to penalties, interest, or even legal action.