Change by Finance Act 2066

Major Changes by Finance Act 2066
In Income Tax Act 2058

1. Increment in Income Tax Ceiling

Income Tax Ceiling increased to Rs. 160,000 for individual and Rs 200,000 for couple. However, 1% tax will be charged up to this limit. For detail tax rates, refer Annexure 1

2. Capital gain tax decreased to 10%

Capital gain tax is has been reduced from 15 percent to 10 percent in case of natural person. The rate is 15% for other than natural person. – Sec 89Ka.

3. Capital Gain tax on disposal of Land and Building – New Sec 89kha added

Tax should be deducted at the Land Revenue Office on capital gain on disposal of Land or Land and Building on following basis:
a. If the ownership of disposed Land or Land and Building is more than years, 5 percent.
b. If the ownership of disposed Land or Land and Building is less than 5 years, 10 percent.

4. Casual Gain to be included in Taxable Income - Sec 5(gha) added

Casual gain should also be included in computation of taxable income of the along with income from business, income from employment and income from investment.

Tax should be deducted at 25% on payment of casual gain. As per Section 92, tax deducted will be final withholding tax.

But National and International Level Prizes derived against the contribution provided in the field of Literature, Art, Culture, Sports, Journalism, Science, Technology or Public Administration may be exempt from casual gain tax by notifying in the Nepal Gazzette.

5. Tax Rate Concession increased for Special Industry and Information Technology Industry - Sec 11(3)(ka): amended

a. Arrangement has been made to levy only 90 percent income tax on special industries and information technology industry which directly employ 300 or more Nepalese (up to last year it was 500 or more) all the year round. Similarly, industries which directly employ 1200 or more Nepalese nationals all the year round or which provide direct employment to more than 100 Nepalese nationals including 33 percent women, dalits (the downtrodden) or the handicapped will have to pay only 80 percent tax on their income of that particular year.
b. In case any special industry is operated in a very-undeveloped, undeveloped or underdeveloped area, tax shall be imposed at the rates of 50, 70 and 75 percent (earlier it was 70, 75 and 80 percent) respectively of the rates otherwise applicable, for ten years including the year in which the industry started its operation.

6. Tax Exemption for Hydro Power for first 7 years and 50% tax exemption for next 3 years - Sec 11(3gha) added:

A corporate institution having licensed of generation, transmission and distribution of electricity shall get full tax exemption for first 7 year from the date of commercial electricity generation, generation and transmission, generation, transmission and distribution if it is done within Chaitra end 2075. And it will get 50 percent tax rebate for next 3 years.

But the provision applicable at the time of getting license will be applicable to the licensed persons who have started commercial electricity generation before application of above provision.

7. Concession for the development of infrastructure of National Importance Projects - Sec 11kha added

Arrangement has been made not to look into Income source for the investment until Chaitra end 2075 in manufacturing industries using more than 50 percent indigenous raw materials, employing more than 300 national workers or those of national importance such as hydro electricity projects, international airports, tunnel ways, road ways or railways.

8. Tax on gain on transaction of Commodity Future : Sec 88(ka)(6) added

Tax shall be levied in at 10 percent on the profit and gain on transaction under Commodity Future Market.

9. No need to pay advance tax if estimated advance tax is less than Rs. 5, 000 - Sec 94(2) amended

Where the amount of total installments calculated is less than Rs 5,000, the amount of the installment shall not be required to pay. (Earlier it was less than Rs. 2,000)

10. Amendment in Definition of Non Business Chargeable Asset

Non-Business Taxable Assets mean lands, buildings and interest in any entity, or securities, other than the following assets:
1. Business assets, depreciable assets or trading stocks.
2. Private house of a natural person in the following conditions:
(a) Under continued ownership for ten or more years (up to last year it was 3 or more years), and
(b) Lived in for ten or more years (up to last year it was 3 or more years) continuously or at different times by the person.
2a. An interest of a beneficiary in a retirement fund,
3. Land and private house of a natural person which has been disposed of at a price of less than five million rupees (up to last year it was 10 million rupees), or
4. Assets disposed of through transfer by any means, other than sale and purchase within three generations

11. Increment of limit of Income and turnover of fixed tax payer : Amendment in Section 4(4)(kha)

The resident individual has to pay income tax at a fixed amount for an income year under following circumstances:

a. The person earned income during the income year only from a business having its source in Nepal;
a1. The person does not claim medical tax credit as per Sec.51 and withhold tax as per Sec.93;
b. If the income and turnover of the business does not exceed the threshold of Rs. 200,000 (up to last year it was Rs. 150,000) and Rs. 20,00,000 (up to last year it was Rs. 15,00,000) respectively, and
c. The person has opted for the application of this provision in that income year.

The fixed amount as per Schedule 1 (Sec 1(7))
a. Rs. 5,000: In case the business is being conducted at metropolitan or sub metropolitan cities.
b. Rs. 2,500: In case the business is being conducted at municipality area.
c. Rs. 1,500: In case the business is being conducted at any other area.