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 500,000 | 1% |
| 500,001 – 700,000 | 10% |
| 700,001 – 1,000,000 | 20% |
| Above 1,000,000 | 30% |
For Companies
| Type of Company | Tax Rate |
|---|---|
| Public Limited Companies | 25% |
| Private Limited Companies | 25% |
| Banks and Financial Institutions | 30% |
| Insurance Companies | 30% |
| Hydroelectricity Companies | 10% |
| Manufacturing Companies | 20% |
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.