Introduction to Tax Filing in Nepal
Tax filing means officially telling the government how much money you earned and how much tax you owe for a certain period, usually a year. In Nepal, businesses, shops, companies, and NGOs must report their income and pay taxes based on the rules set by the Inland Revenue Department (IRD).
If a person is running a small shop, managing a private company, or operating an NGO, tax filing is a legal obligation that must be complied in every country. In Nepal, the Inland Revenue Department (IRD) regulates all tax-related matters, and failing to comply can lead to penalties or even business disruptions. This article will provide you all the detailed process and documents required for tax filing requirements for various entities and highlights the role of professional tax filing services in ensuring smooth compliance. Also you will get some insights about the fines and penalites which will incur incase of negligence.
Why Tax Filing Is Important for Businesses and NGOs
Tax filing is the mandatory compliance to be followed by each entities due to the following reasons:
- Legal requirement under Nepal’s tax laws
- Maintains business transparency and credibility
- Required for license renewal and audits
- Helps in securing loans and grants
Tax Filing for Small Shops in Nepal
Small businesses such as tea shops, retail stores, canteens, and salons fall under the presumptive tax system in most cases.
Types of Taxes Applicable to Small Retailers and Tea Shops
- Income Tax (Presumptive)
- TDS (if hiring staff or paying rent)
- Municipal taxes (signboard tax, waste management fee)
PAN Registration and Presumptive Tax System
If the turnover of the business is below NPR 10 million, it is eligible for simplified tax rates under the presumptive system. You still need a PAN number and must file tax annually.
How to File Taxes as a Sole Proprietor
- Maintain basic records of daily sales and expenses
- Submit the income statement to the IRD
- Pay tax through your ird login account using connectips or at authorized banks
- File an annual income tax return using the IRD e-filing portal
Tax Filing for Companies in Nepal
Registered companies, including Private Limited Companies (Pvt. Ltd.), are required to maintain audited financial statements and submit detailed tax filings.
Annual Tax Filing Requirements for Private Limited Companies
- Income Tax Return (ITR)
- VAT Return (monthly or quarterly, if applicable)
- Advance Tax Payments (if applicable)
- Annual Audit Report submission
- TDS return submission
Note: The business should obtain the tax clearance certificate for bank or registration and renewal purposes after filing the tax returns.
Withholding Tax (TDS), VAT, and Advance Tax Compliance
Companies must deduct Tax Deducted at Source (TDS) on:
- Rent payments
- Salary of the employees (Check the latest salary tax rate in Nepal)
- Payments to service providers
They must also file VAT returns if VAT registered and make advance tax payments in installments if expected income exceeds thresholds.
Audit Reports and IRD Submission Deadlines
Audited reports must be submitted within 3 months of the fiscal year-end. Delays can result in penalties which is 0.1% per annum of the turnover of the business.
Tax Filing for NGOs and Non-Profits in Nepal
Tax Responsibilities of NGOs and INGOs
NGOs are often qualify for tax exemptions but they are still required to:
- File annual tax returns
- Declare foreign donations and local income
- Submit audited financial reports
- Deduct and file TDS if employing staff or paying rent
Income Source Declaration and Tax Exemptions
NGOs must disclose all income sources, including:
- Donations and grants
- Service revenue (if any)
- Interest income
They may apply for tax exemption certificates but must still file annual reports to maintain status.
Reporting to IRD and Social Welfare Council
Apart from tax filing with the IRD, NGOs must also report to the Social Welfare Council (SWC) and the District Administration Office (DAO).
Common Challenges in Tax Filing for Small Entities
Lack of Record Keeping and Documentation
Many small businesses and NGOs don’t maintain proper sales, purchase, and payroll records, leading to errors or delayed filings.
Errors in PAN/VAT Filings
Incorrect PAN, mismatched entries, or missed TDS deposits can result in IRD notices or penalties.
Penalties for Late or Wrong Submissions
- Late filing of returns: Minimum Rs 100 per month
- Non-payment of TDS: Additional fines and interest
- Wrong tax rates: Reassessment and audit risk
Tips for Hassle-Free Tax Filing in Nepal
Maintain Proper Sales and Expense Records
Use simple tools like Excel or mobile apps to track daily business activities.
File Returns Before Deadlines to Avoid Fines
Mark tax deadlines on your calendar or consult a professional to avoid missing them.
Consult a Registered Tax Practitioner or Chartered Accountant
Hiring a tax expert ensures accurate filings and helps avoid costly mistakes.
Use Government’s IRD Portal for Online Filing
The IRD portal allows you to file PAN, VAT, and income tax returns online with ease.
How Professional Tax Filing Services Can Help
Benefits of Hiring a Tax Consultant in Nepal
- Accurate tax computation and filings
- Assistance with PAN, VAT, and TDS
- Timely reminders of due dates
- Representation during IRD audits or inquiries
What to Look for in a Reliable Tax Filing Service
- Experience with your business type (retail, NGO, company)
- Transparent pricing and communication
- Client reviews and past references
Cost of Tax Filing Services for Small Businesses and NGOs
- Small shops: NPR 2,000–5,000 annually
- Companies: NPR 10,000–30,000 annually (depending on volume)
- NGOs: NPR 15,000–40,000 depending on donor reporting needs
Conclusion
Filing taxes may seem complex, but with proper understanding and the support of professional services, it becomes manageable and beneficial for long-term business success. Whether you run a tea shop in Kathmandu, a small company in Pokhara, or an NGO in rural Nepal, timely and accurate tax filing is essential. Investing in tax compliance today ensures smoother operations, avoids penalties, and builds trust with regulators and stakeholders.
Frequenlty Asked Questions
Is tax filing mandatory for all businesses in Nepal?
Yes. All registered entities in Nepal including small shops, companies, and NGOs must file annual tax returns with the Inland Revenue Department (IRD), even if there is no taxable income.
What is the deadline for filing income tax returns in Nepal?
The deadline for filing income tax returns is usually within three months of the end of the fiscal year (by mid-October). Extensions are sometimes granted by IRD.
Do small shops need to register for VAT?
No, VAT registration is only mandatory if the annual turnover exceeds NPR 5 million. Small retailers and tea shops usually operate under the presumptive tax system.
Can NGOs be exempted from paying taxes in Nepal?
Yes, NGOs can apply for tax exemption certificates, but they must still file annual tax returns and declare all sources of income to the IRD.
What documents are required for tax filing?
You typically need:
- PAN certificate
- Financial statements or sales records
- TDS records (if applicable)
- Audit report (for companies and NGOs)
- Previous tax filing details
Should I hire a tax consultant or file on my own?
If you're unfamiliar with tax laws or have a registered company or NGO, it's highly recommended to hire a tax consultant or chartered accountant to avoid errors and ensure compliance.
If you’re an entrepreneur looking to file tax return of your business or need guidance at any step, Estartup Nepal is here to help. From tax filing services in Nepal to business consulting, we make the process simple, stress-free, and fully compliant. Have questions or facing any issues? Feel free to reach out—our team is always ready to support you.