Personal And Business Tax Rate in Nepal – A Complete Guide

Tax is not as complicated as one would think for it to be. In simple words, tax is something you pay to the government for every earning you or your business does. 

Taxes are required contributions imposed by a government agency on individuals or corporations, whether municipal, regional, or national. Tax revenues support government functions such as public works and services like roads and schools and programs like Social Security and Medicare. 

Personal And Business Tax Rate in Nepal - A Complete Guide

Most governments rely on taxes as their primary source of revenue. This money is used to fund public services such as schools, emergency services, and social programs and repair and maintain public infrastructure, such as the roads we commute on. 

Direct taxes and indirect taxes are the two sorts of these taxes. Both taxes are implemented differently. Some are paid directly, such as the dreaded income tax, corporate tax, and wealth tax, while others are paid indirectly, such as sales tax, service tax, and value-added tax. 

Learn everything you need to know about taxes in Nepal through this complete guide on the personal and business tax rates in Nepal.

The Difference Between Direct and Indirect Taxes 

The Difference Between Direct and Indirect Taxes - Personal And Business Tax Rate in Nepal - A Complete Guide

There are many differences between direct and Indirect taxes. Some of which are listed below:

Direct Tax Indirect Tax 
It is based on the amount of money earned, and the actions carried out.It is based on products and services. 
In direct tax, the tax burden cannot be moved.The weight of indirect taxes has changed.
It is paid directly by the person in question.It is produced by one person, but they recover it from another, i.e., the person who is the final consumer of the tax.
It is paid once the revenue reaches the taxpayer’s hands. It is paid before the products or services are delivered to the taxpayer.
Difficult Tax collection. Relatively more accessible tax collection. 

Types Of Direct and Indirect Tax 

Types Of Direct and Indirect Tax - Personal And Business Tax Rate in Nepal - A Complete Guide

Even within direct and indirect taxes, there are many different types. They are: 

Major Types of Direct Taxes

Income Tax: According to the income tax department’s tax brackets, taxes are imposed on and paid by the same person. 

Corporate Tax: Companies and corporations are compensated based on their profitability. 

Wealth Tax: A tax levied on a person’s property value. 

Estate Tax: In the event of an inheritance, the cost is borne by the individual. 

Gift Tax: A person who receives a taxable gift must pay tax to the government. 

Fringe Benefits Tax: Paid by an employer who provides employees with fringe benefits and collected by the state government. 

Major Types of Indirect Taxes 

Excise Duty: The manufacturer is responsible for paying the tax, then passed on to retailers and distributors. 

Sales Tax: A shopkeeper or retailer pays the tax, which is subsequently passed on to customers through sales tax on goods and services. 

Customs Duty: Import tariffs on items from outside the country are paid for in the end by consumers and retailers. 

Entertainment Tax: The cinema owners are liable, passing the burden on moviegoers. 

Service Tax: Charged on services provided to customers, such as a restaurant’s food bill. 

For all of you who are confused about how taxes actually work and how much you need to pay, here is a guide: 

Nepal Income Tax Slab Rate 2077-78 (2020-21)

Nepal Income Tax Slab Rate 2077-78 (2020-21) - Personal And Business Tax Rate in Nepal - A Complete Guide

1. Personal Tax 

Residents (Natural Person)

i. Employed Individuals 

Income Level (NRP)Tax Rate (Fiscal Year 20-21)Taxable Amount 
Up to 4 Lakhs 1%NRP 4,000
5 Lakhs 10% NRP 14,000
7 Lakhs 20%NRP 54,000 
Next 13 Lakhs 30%NRP 4,44,000
Additional Tax above 20 Lakhs36%NRP 6,24,000

ii. Employed Couple (Married Couple) 

Income Level (NRP)Tax Rate (Fiscal Year 20-21)Taxable Amount 
Up to 4 Lakhs 50 thousand1%NRP 4,500
5 Lakhs 50 thousand10%NRP 14,500 
7 Lakhs 50 thousand 20%NRP 54,500
Next 13 Lakhs 50 thousand 30% NRP 4,29,500 
Additional Tax above 20 Lakhs 50 thousand 36% NRP 6,09,500

            Non-Residents 

Source of Income Tax (20-21)
Normal Transactions 25%
Through shipping, air or telecom services, postage, satellite, and optical fiber project5%
Shipping, air or telecom services through the territory of Nepal 2% 
Repatriation of profit by Foreign Permanent Establishment 5%

2. Corporate Income Tax 

Corporate or Business Income Tax - Personal And Business Tax Rate in Nepal

            For Entities – Company/Firm/Industry

Type of BusinessNormal Tax RateRebate Applicable Tax Rate
Normal Business25%25%
Special Industry under section 11 for the whole year25%20%20%
Constructing and operating ropeway, cable car, railway, tunnel, or sky bridge25%40%15%
Constructing and operating roads, bridges, tunnels, railway, and airports25%50%12.5%
Having export income from a source in Nepal25%***20%20%
Banks and financial institutions30%***30%
General Insurance30%***30%
Engaged in tobacco, alcohol and related products30%***30%
Telecom and Internet Services30%***30%
Capital market, securities, and related30%***30%

3. Vehicle Tax In Nepal FY 2020-21 

Vehicle Tax In Nepal - Personal And Business Tax Rate in Nepal

i. Motorcycle

CCTax Amount
Up to 125 ccNPR 2,800
126 cc – 160 ccNPR 4,500
161 cc – 250 ccNPR 5,500
251 cc – 400 ccNPR 9,000
401 cc – 650 ccNPR 20,000
Above 651 ccNPR 30,000

ii. Electric Vehicles 

CCTax Amount
350 Watt to 1000 WattNPR 1500
1001 watt to 1500 wattNPR 2000
1501 watt and higherNPR 3000

iii. Car, Jeep, Van, and MicroBus 

CCTax Amount
Up to 1000 ccNPR 21,000
1001 cc – 1500 ccNPR 23,500
1501 cc – 2000 ccNPR 25,500
2001 cc – 2500 ccNPR 35,500
2501 cc – 2900 ccNPR 41,000
Above 2901 ccNPR 58,500

4. Excise Duty 

Excise Duty Tax - Personal And Business Tax Rate in Nepal
GoodsExcise Duty
Pan masalaNPR 650/kg
Flavored areca (supari) with tobaccoNPR 225/kg
Edible Fruit and Nuts; Peel of Citrus Fruit or Melons5%
Tobacco and Manufactured Tobacco SubstitutesNPR 650/kg
Hukkah FlavorNPR 1000/kg
Essential Oils and Retinoids; Perfumery, Cosmetic or Toilet Preparations-others10%
Wire of iron or non-alloy steelNPR 1650/MT

5. Value Added Tax (VAT)

Value Added Tax (VAT) - Personal And Business Tax Rate in Nepal
  • The 13 percent VAT reduction on products and services is unchanged from last year. 
  • The VAT rate on items exported will stay at 0%. VAT paid by the UN on its products and services in response to Covid-19 will be repaid. 
  • Individuals who operate without registering for VAT, even after being advised to do so, maybe fined 50% of the tax due. 
  • Taxes on transportation, tourism, and movie theaters can now be paid quarterly. 

Conclusion 

So, here it is. The taxes that need to be paid. Sure, we are not taught in schools how to do that, but this is an adventure you need to figure out on your own. 


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