Income Tax Act, 2002 (2058) Nepal: A Simple Guide

Income Tax Act, 2002 (2058) Nepal

The Income Tax Act, 2002 (2058) is one of the main laws about taxes in Nepal. Whether you are starting a business, running a company, or earning income as an individual, knowing this law helps you follow the rules and avoid penalties.

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

The Income Tax Act, 2002 (2058) is the main law that governs income tax in Nepal. It replaced older tax laws and made the tax system simpler and more modern.

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


Objectives of the Income Tax Act

The law has four main goals:

  • Make the tax system fair and clear.
  • Cover all types of income to increase the tax base.
  • Increase government revenue for national development.
  • Allow taxpayers to calculate and file their own taxes.

Who Must Pay Income Tax in Nepal?

The following people and organizations must pay income tax:

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

Types of Taxable Income

The law identifies several kinds of income that are taxed:

  • Employment Income: Salary, bonuses, and allowances.
  • Business Income: Profits from trade, commerce, or services.
  • Investment Income: Interest, dividends, capital gains, and rent.
  • Windfall Gains: Lottery prizes, awards, or 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)

Income Range (NPR)Tax Rate
Up to 500,0001%
500,001 – 700,00010%
700,001 – 1,000,00020%
Above 1,000,00030%

For Companies

Type of CompanyTax Rate
Public Limited Companies25%
Private Limited Companies25%
Banks and Financial Institutions30%
Insurance Companies30%
Hydroelectricity Companies10%
Manufacturing Companies20%

Key Provisions of the Income Tax Act

  • PAN is Mandatory: All taxpayers must get a Permanent Account Number (PAN).
  • Self-Assessment: Taxpayers calculate and file their own taxes.
  • Withholding Tax: Payments like salaries, rent, or contracts may have tax deducted at source.
  • Fines and Penalties: Not following the law can result in fines, interest, or legal action.
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