The Government of Nepal, through the Finance Bill 2082, has introduced a range of special tax exemptions and relief measures to help taxpayers, businesses, and institutions recover from compliance burdens. These exemptions are valid for a limited period and apply to various sectors, including transport, healthcare, VAT filers, excise payers, digital service providers, and even individual taxpayers.
Let's start by understanding basis of Income tax law.
What is Income Tax Law?
Income tax law in Nepal is the rule that says how much tax people and businesses have to pay on the money they earn. It’s based on the Income Tax Act, 2058. If you earn money from a job, business, or investment, and it goes over a certain limit, you must pay tax. The Inland Revenue Office collects these taxes, and you can pay them at their office or through certain banks.
What are the Legal Provisions Surrounding Tax Exemption in Nepal?
Tax exemptions in Nepal are mainly governed by the Income Tax Act, 2058 (2002). Here are the key provisions:
- Section 10 outlines the types of income that are fully exempt from tax. This includes agricultural income, certain government benefits, scholarships, gifts, and income earned by approved charitable institutions.
- Section 11 provides tax concessions for specific sectors like export-based industries, infrastructure development, and special industries. These may include partial or full income tax exemptions for a defined number of years.
- Section 12 allows taxpayers to deduct donations made to approved charitable organizations, within specified limits.
Additionally, the Act gives the government authority to announce new exemptions through official notifications. Many Finance Acts over the years have introduced time-limited exemptions for targeted sectors and taxpayers.
Sectors with Special Tax Exemptions
Freight Payments Without PAN Now Deductible
Transport service providers who hired vehicles from individuals without a PAN during FY 2078/79 to 2080/81 can now claim such payments as business expenses. The condition is that tax was deducted and deposited as per Income Tax Act, 2058. Even if the PAN is not mentioned, the payment will be considered deductible for tax purposes.
Tax-Free Provident Fund Transfers to Recognized Funds
Any contribution made to previously approved provident funds must now be mandatorily transferred to recognized institutions like:
- Employee Provident Fund
- Citizen Investment Trust
- Social Security Fund
- Retirement Fund
If such transfers are completed by the end of Ashadh 2083, no tax will be deducted on the transferred amount.
Tax and Fine Waivers for Community Hospitals and Transport Cooperatives
Community-based hospitals and transport-related organizations for which the tax offices has done tax assessment before Jestha 15, 2082 are eligible for full waivers on:
- VAT
- Income tax
- Interest
- Fines and penalties
The only requirement is that all pending taxes must be filed by the end of Poush 2082.
VAT Interest and Penalty Waiver for Non Filers
VAT-registered businesses that submit returns and pay all due taxes (along with 50% interest) for the period ending Chaitra 2081 will be exempt from the remaining:
- Interest
- Penalties
- Additional fees
This relief is applicable only if dues are cleared by Poush 2082.
Excise Duty Waiver for Late Filers Till Poush 2082
Entities liable for excise duties under the Excise Duty Act 2058 are offered significant relief. If they:
- File returns
- Pay dues and 50% of interest
by Poush 2082, they will be exempt from the remaining fines and interest.
VAT Exemption for International Flight Operators and Ticket Sellers
- International airlines that register and pay VAT on transactions conducted from Kartik 1, 2080 to Ashwin end, 2082 are eligible for waivers on interest, fines, and penalties.
- Similarly, international air ticket agents are exempt from VAT, interest, and penalties if they settle dues within the deadline.
Income Tax Relief for Non-Filers with Past Assessments
Individuals who received amended income tax assessments but never filed returns can:
- File tax returns by Poush 2082
- Pay applicable taxes
Even if returns were not filed earlier, they can still comply and benefit from this exemption. Also, the time limit for reassessment won’t apply in these cases.
No Permanent Establishment for Foreign Digital Service Providers
Foreign companies providing digital services in Nepal and complying with VAT registration under Finance Act 2081 and VAT Act 2052 will not be classified as having a Permanent Establishment under the Income Tax Act. This prevents double taxation.
Tax Reassessment Benefits for Restructured Public Entities
If government organizations or public institutions underwent legal restructuring and received revised tax assessments, they can now:
- Pay due amounts by Ashadh 2082
- Get full waivers on related interest and penalties
Income Tax Waiver for Old and Non-Operational Vehicles
Vehicles older than 20 years or those no longer in use, where the cost has already been written off in the accounts, are eligible for a tax and interest exemption for fiscal years 2081/82 and 2082/83.
If you're unsure how to clear your pending taxes, we have a detailed blog post on how to pay tax in Nepal that walks you through the process step by step.
The only condition to qualify is that all due taxes must be cleared by Poush 2082.
Who Can Benefit from Tax Waivers in Nepal?
✅ Eligible Entities and Individuals Include:
- Transport businesses using rental vehicles without PAN
- Contributors to provident and social security funds
- Community hospitals and transport cooperatives
- VAT and excise duty filers with pending dues
- International flight service providers and ticket sellers
- Taxpayers with amended assessments or no filed returns
- Foreign companies selling digital services in Nepal
- Public sector institutions undergoing legal changes
- Owners of vehicles over 20 years old
Deadlines You Shouldn’t Miss
📅 Poush 2082
- Last date for most tax filings and payment to claim exemptions
📅 Ashadh 2083
- Final deadline for provident fund transfers and public entity settlements
Conclusion
These tax exemptions and facilities in Nepal under Finance Bill 2082 are a golden opportunity for individuals and businesses to settle their tax matters and avoid penalties. Whether you're a small business owner, a digital service provider, or part of a large institution, taking advantage of these time-bound facilities can save you substantial money and compliance hassle.
👉 Act now before Poush and Ashadh deadlines approach.
If you need further help with PAN-related queries or business compliance, eStartup Nepal is here to guide you—every step of the way.