Amendments in Income Tax Act, 2058 applicable for F/Y 2079-80

Section 11(1)



Applicable for 2079/80: No tax shall be levied on an income earned by carrying on agricultural business other than income earned by carrying on an agricultural business by getting registered as a firm, company, partnership, and corporate body and other than on agricultural income earned from an agricultural business in the land as referred to in clauses (gha) and (nga) of Section 12 of the Act Relating to Land, 2021(1964).



Provided, if any income is earned by carrying on agricultural business, business of dehydrating vegetables, and cold storage business by any firm, company, partnership firm, and other corporate body, 100 percent tax on applicable income tax shall be exempted.



Previous Provision: No tax shall be levied on an income earned by carrying on agricultural business other than income earned by carrying on an agricultural business by getting registered as a firm, company, partnership, and corporate body and other than on agricultural income earned from an agricultural business in the land as referred to in clauses (gha) and (nga) of Section 12 of the Act Relating to Land, 2021(1964).



Provided, if any income is earned by carrying on agricultural business by being registered as any firm, company, partnership firm and other corporate body, 25 % tax on applicable income tax shall be exempted.





Section 11(3)(Kha)



Applicable for 2079/80: Special industries established in Karnali Province and hilly districts of Sudurpashchim Province providing employment to more than 100 Nepali citizens shall be exempted from income tax for 15 years from the date of starting the transaction.



Previous Provision: Special Industry established in Karnali Province providing employment to more than 100 Nepali citizens shall be exempted from income tax for 15 years from the date of starting the transaction.





Section 11(3)(Gha)



Applicable for 2079/80: Tax exemption shall be provided as below to a person engaged in commercial transactions of electricity:

100 % tax exemption for the first 10 years from the date of starting of commercial transaction and 50 % tax exemption for next 5 years shall be provided to the licensed person starting commercial production and distribution of hydroelectricity, electricity from solar, electricity from wind, and bioelectricity within Chaitra 2083.



Provided, 100 % tax exemption for the first 15 years and 50 % tax exemption for the next 6 years shall be provided to reservoir-based and semi reservoir-based hydropower projects with a capacity higher than 40 MW completing financial closure within Chaitra end, 2085.



Previous Provision: Tax exemption shall be provided as below to a person engaged in commercial transactions of electricity:

100 % tax exemption for the first 10 years from the date of starting the commercial transaction and 50 % tax exemption for the next 5 years shall be provided to the licensed person starting commercial production and distribution of hydroelectricity, electricity from solar, electricity from wind, and bioelectricity within Chaitra 2082.



Provided, 100 % tax exemption for the first 15 years and 50 % tax exemption for the next 6 years shall be provided to reservoir-based and semi reservoir-based hydropower projects with a capacity higher than 200 MW completing financial closure within Chaitra end, 2082.





Section 11(3Nga)(Ga)



Applicable for 2079/80: Tax exemption on income earned from export in any income year from a source in Nepal shall be as follows:

(a) if tax is chargeable at the rate of twenty percent on an income of a resident natural person, twenty-five percent of that tax, and if thirty percent is taxable, fifty percent of that tax,

(b) twenty percent of tax leviable on the income of an entity,

(c) additional fifty percent of the tax on income earned from the export of goods produced in Nepal after deduction of the exemption under clause (ka) or (Kha).



Previous Provision: Tax exemption on income earned from export in any income year from a source in Nepal shall be as follows:

(a) if tax is chargeable at the rate of twenty percent on an income of a resident natural person, twenty-five percent of that tax, and if thirty percent is taxable, fifty percent of that tax,

(b) twenty percent of tax leviable on the income of an entity,

(c) additional thirty-five percent of the tax on income earned from the export of goods produced by a production-based industry, after deduction of the exemption under clause (ka) or (kha).





Section 11(3Ba)



Applicable for 2079/80: Industry producing medical vaccines, oxygen gas, and the sanitary pad shall be exempted from tax at 100 percent for the first 5 years from the date of starting production, and 50 percent tax shall be exempted for the next 2 years.



Previous Provision: Industry producing medical vaccines, oxygen gas, and the sanitary pad shall be exempted from tax at 100 percent for the first 3 years from the date of starting production, and 50 percent tax shall be exempted for the next 2 years.





Section 11(3Bha)[Newly Added Provision]



Applicable for 2079/80: In the case of Industries established within Ashadh end 2082, with the objective of production and assembly of electric vehicles, 40% income tax will be exempted for 5 years from the date of starting the transaction.



Previous Provision: No such Provision.





Section 11(3Ma)[Newly Added Provision]



Applicable for 2079/80:In the case of Industries established within Ashadh end 2082, with the objective of production of agricultural equipment, 100 percent income tax will be exempted for 5 years from the date of starting the transaction.



Previous Provision: No such Provision.





Section 11(Ga)



Applicable for 2079/80: Provision Removed



Previous Provision: In case of investment made up to Chaitra end 2080 in infrastructure development projects such as hydropower projects of national importance, international airports, underpass and roadways, railways, etc. cement industry, steel industry, industry based on agriculture, industry based on tourism, special industry providing employment to more than 300 Nepali citizens and utilizing more than 50 percent local raw materials, any source of

investment will not be sought.





Section 21(3)(Ga)



Applicable for 2079/80: Explanation:

Ga) “Cash Payment” means a payment except for payment by a letter of credit, account payee cheque, draft, money order, telegraphic transfer, money transfer (hundi) through a bank or financial institution, payment through a digital wallet approved by Nepal Rastra Bank, and a transfer made by any other means between

banks or financial institutions.



Previous Provision: Explanation:

c) “Cash Payment” means a payment except for payment by a letter of credit, account payee cheque, draft, money order, telegraphic transfer, money transfer (hundi) through a bank or financial institution, and a transfer made by any other means between banks or financial institutions.





Section 57(1Ka)



Applicable for 2079/80: For the purpose of calculation of change in ownership by fifty percent or more than fifty percent of an entity, only following ownership of such entity shall be taken into consideration.

Ka) Ownership owned by shareholder or partner having ownership of one percent or more than one percent of total ownership

Kha) Ownership owned by shareholder or partner having ownership of less than one percent who is associated person of a shareholder or partner holding ownership of more than one percent of total ownership



Previous Provision: For the purpose of calculation of change in ownership by fifty percent or more than fifty percent of an entity, only following ownership of such entity shall be taken into consideration.

Ka) Ownership owned by shareholder having ownership of one percent or more than one percent of total ownership

Kha) Ownership owned by a shareholder having ownership of less than one percent who is associated person of a shareholder holding ownership of more than one percent of total ownership





Section 65(1)(Kha)[Newly Added Clarification]



Applicable for 2079/80: Clarification: For the purpose of this section, “Contribution-based Interest” means interest related to the retirement contribution contributed within the limit as per section 63(3).



Previous Provision: No such clarification





Section 95ka(5)



Applicable for 2079/80: The Land Revenue Office shall collect advance tax as follows at the time of registration on capital gain earned from the disposal of land or private building of any individual:



Previous Provision: The Land Revenue Office shall collect advance tax as follows at the time of registration on capital gain earned from the disposal of land or private building of any individual:





Section 97(1)(Ga1)[Newly Added Provision]



Applicable for 2079/80: Resident natural person having income only as mentioned in sub section (6kha), (6 Ga) (6 Gha) of Sec (95Ka) don’t have to file income tax return under section 96.



Previous Provision: No such provision





Schedule 1 Sec 1(3)



Applicable for 2079/80: The provision contained in sub-section (4) of this Schedule shall apply in the following circumstances:

Ka) In the case of a resident individual, where the income is more than five hundred thousand rupees in any income year or in the case of a resident couple who has made choice referred to in Section 50, where the income is more than six hundred thousand rupees in any income year, and

Kha) Where the net profit derived from the disposal of non-business taxable assets is included in the computation of the income and corresponding taxable income of that individual or couple.



Previous Provision: The provision contained in sub-section (4) of this Schedule shall apply in the following circumstances:

Ka) In the case of a resident individual, where the income is more than four hundred thousand rupees in any income year or in the case of a resident couple who has made choice referred to in Section 50, where the income is more than four hundred fifty thousand rupees in any income year, and

Kha)Where the net profit derived from the disposal of non-business taxable assets is included in the computation of the incomeand corresponding taxable income of that individual or couple.





Schedule 1 Sec 1(2)



Applicable for 2079/80: Tax rate to be levied on taxable income of resident individual and couple elected under section 50 shall be as follows:



Previous Provision: Tax rate to be levied on taxable income of resident individuals and couple elected under section 50 shall be as follows:







Schedule 1 Sec (4)



Applicable for 2079/80: Tax shall be levied at the rate referred to in sub- section (1) or (2) of this Schedule on the amount whichever is higher of the following amounts, as if only it were the taxable income of that individual or couple:

(1) The amount remaining balance after subtracting the amount of profits from the total taxable income of that individual or couple,

(2) Five hundred thousand rupees, in the case of that individual, or Six hundred thousand rupees, in the case of that couple.



As per Sec 4(Kha), tax shall be levied @ 10% on remaining amount of taxable income. Provided that, tax @ 5% shall be levied if the ownership of disposed non-business taxable asset (land and house) is of five years or more, otherwise tax @ 7.5% shall be levied for ownership of less than 5 years.



Previous Provision: As per Sec 4 (Ka), Tax shall be levied at the rate referred to in sub-section (1) or (2) of this Schedule on the amount whichever is higher of the following amounts, as if only it were the taxable income of that individual or couple:

(1) The amount remaining after subtracting the amount of profits from the total taxable income of that individual or couple,

(2) Four hundred thousand rupees, in the case of that individual, or four hundred fifty thousand rupees, in the case of that couple.



As per Sec 4(Kha), tax shall be levied @ 10% on remaining amount of taxable income. Provided that, tax @ 2.5% shall be levied if the ownership of disposed non-business taxable asset (land and house) is of five years or more, otherwise tax @ 5% shall be levied for ownership of less than 5 years.





Schedule 1 Sec (1)(4Ka)



Applicable for 2079/80: Notwithstanding anything contained elsewhere in the section, tax shall be levied @1 % on income under sub-section 6Kha, 6Ga and 6Gha of section 95K of a resident natural person not engaged in any business.



Previous Provision: No such provision







Schedule 1 Sec (1)(12)



Applicable for 2079/80: Notwithstanding anything contained elsewhere in this Section, where any resident individual has made investment insurance, tax shall be computed only in the amount that remains after deduction of the annual premium or forty thousand rupees, whichever is lesser, from the taxable income.



Previous Provision: Notwithstanding anything contained elsewhere in this Section, where any resident individual has made investment insurance, tax shall be computed only in the amount that remains after deduction of the annual premium or twenty-five thousand rupees, whichever is lesser, from the taxable income.





Schedule 1 Sec (2)



Applicable for 2079/80: Tax shall be levied at the following rate on the turnover, except tax exempt turnover, of a cooperative registered under the Cooperatives Act, 2074 (2017):





Previous Provision: Tax shall be levied at the following rate on the transaction, except tax-exempt transaction, of a cooperative registered under the Cooperatives Act, 2074 (2017):