Free invoice generator and tax tools for Nepal

Business income in Nepal is taxed under the Income Tax Act 2058 by the Inland Revenue Department (IRD), on an income year that follows the Bikram Sambat calendar. A company or other entity pays 25% of taxable income; banks, financial institutions, general insurers, telecom and internet providers, money-transfer, capital-market, tobacco and alcohol businesses pay 30%. A resident individual pays progressive rates: 1% on employment income up to Rs 500,000, 10% up to Rs 700,000 and 20% up to Rs 1,000,000, with higher bands above. The 1% band is not charged on a sole-proprietorship taxpayer, on retirement income, or on a person contributing to a retirement fund or the social security fund.

Small traders may pay a fixed or turnover-based tax instead of the ordinary assessment, described in the small-business section. Employers also carry payroll obligations: provident fund and gratuity under the Labour Act 2074, or contributions to the Social Security Fund under the Contribution-Based Social Security Act 2074. The most recent reform is the Finance Act 2083 (आर्थिक ऐन, २०८३), gazetted on 30 Ashadh 2083 (mid-July 2026), which amended the VAT Act, the Income Tax Act and the Excise Act. IRD publishes its own handbook of the changes on ird.gov.np. One rule affects daily banking. Under section 81Ka of the Income Tax Act, money received for business transactions, whether cash, cheque, QR code or other electronic payment, may not be deposited into a personal bank account.

Nepal has two simplified income-tax regimes for a resident individual running a business in Nepal, under section 4(4) and 4(4Ka) of the Income Tax Act 2058. The fixed-amount regime applies when taxable business income is up to Rs 300,000 and turnover does not exceed Rs 3,000,000. The tax is Rs 7,500 in a metropolitan or sub-metropolitan city, Rs 4,000 in a municipality and Rs 2,500 elsewhere. The turnover-based regime applies when turnover is between Rs 3,000,000 and Rs 10,000,000 and taxable income is up to Rs 1,000,000. The first Rs 3,000,000 carries the fixed amount. Above that, service businesses pay 2% of turnover, most other traders pay 1% on turnover from Rs 3,000,000 to Rs 5,000,000 and 0.8% from Rs 5,000,000 to Rs 10,000,000, and dealers in gas, cigarettes and similar goods on up to 3% margin pay 0.25% and 0.3% on the same bands. Doctors, engineers, auditors, lawyers, athletes, artists and consultants earning from professional or specialist services cannot use it. The taxpayer must choose the regime for the year.