chhatramani/Nepal-Legal-Text-Corpus-44laws huggingface dataset:
Securities Act 2063

Chapter 3 Computation of Tax

Section 9 : Computation of income earned from investment
1)  the profits and benefits derived by any person from investment in any income year shall be the income earned by that person from investment in that year.
2)  The following amounts received by any person in any income year shall be included in computing the profits and benefits derived by that person from investment in that income year:
a) Dividend, interest derived from that investment, payment for natural resources, rent, royalty, profit from investment insurance, profit from interest in a retirement fund which has not got approval pursuant to Sub-section (1) of Section 63 or retirement payment made from the approved retirement fund,
b) Net profits derived from the disposal of nonbusiness taxable property of the investment of that person, computed pursuant to Chapter 8,
c) If, in disposing of the depreciable property of the investment made by that person, the incomings to be received exceed the remaining value comprising the outgoings made for the property of the group of depreciable property pursuant to clause (a) of sub-section (2) of Section 4 of Schedule II, the excess amount,
d) Gift received by that person in respect of investment,
e) Retirement payment made in respect of that investment and retirement contribution, including the amount deposited in the retirement fund for that person,
f) Amounts received for having accepted any restriction in respect of investment and
g) Other amounts required to be included pursuant to Chapter 6 or 7 or Section 56.
3) Notwithstanding anything contained in sub-section (2), the following matters shall not be included in computing profits and benefits derived by any person from investment:
a) The amounts deductible under Sections 10, 54 and 69 and payment from which tax is withheld finally, and
b) The amounts to be included in computing income by that person from employment or business.
Securities Act 2063

Chapter 4 Exemptible Amounts and Other Exemptions

Section 10 : Exemptible amounts
The following amounts shall be exempted from tax:
a) Amount exempted from tax granted to any person entitled to tax exemption facility as provided for in a bilateral or multilateral treaty or agreement concluded between the Government of Nepal and any foreign country or international organisation,
b) Amount received by any natural person for doing employment in the governmental service of a foreign country,
Provided that, –
(1) The person has to be a resident or non-resident person only because of doing employment and
(2) Such amounts have to be paid from the governmental fund of that country.
c) Amount received by a natural person referred to in clause (b) who is not a citizen of Nepal or by his or her nearest family member from the governmental fund of a foreign country,
d) Amount received by a non-Nepalese citizen appointed in the service of the Government of Nepal under the term and condition of tax exemption,
e) All kinds of allowances provided by the Government of Nepal, Provincial Government or Local Level as social security,
f) Amounts received as gift, inheritance or scholarship except the amounts required to be included in computing income pursuant to Sections 7, 8 or 9,
g) Amounts received by an organisation entitled to an exemption for the following:
1) Donation, gift,
2) Other contributions directly related to an organisation entitled to exemption as referred to in Clause (d) of Section 2 without having consideration or without hoping for such contribution or
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3) …………
h) Amount received for pension by a Nepalese citizen having retired from the military or police service of a foreign country from the governmental fund of that country.
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i) Any income of the Government of Nepal, Provincial Government or Local Level,
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j) Amounts earned by Nepal Rastra Bank in pursuance of its objective,
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k) Amounts earned by water supply and sanitation consumer organisations registered as per the Water Resources Act 2049 in pursuance of its objective,
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l) The amount earned by the Collective Investment Fund (Mutual Fund) approved by the Nepal Securities Board in accordance with its purpose,
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m) The amount earned by a non-profit organisation established on the basis of a memorandum of understanding with the Government of Nepal and operating with the purpose of not profiting or reporting.
1 Amended by the Financial Act, 2075.
2 Inserted by the Financial Act, 2075.
3 Inserted by the Financial Act, 2078.
4 Amended by the Financial Act, 2080.
Securities Act 2063

Chapter 4 Exemptible Amounts and Other Exemptions

Section 11A : Tax on construction and operation of infrastructure
If any agreement is concluded between the Government of Nepal and any person for the construction and operation of any infrastructure, the person constructing and operating such infrastructure shall enjoy the tax facilities provided by the Act in force at the time of conclusion of the agreement for the whole period of the agreement

Securities Act 2063

Chapter 4 Exemptible Amounts and Other Exemptions

Section 12 : Donation, gift given to organisations entitled to tax exemption
1) In computing his taxable income in any income year, any person may make a claim to subtract the amount of donation or gift given to an organisation entitled to tax exemption approved by the Department for the purpose of this Section.
2) Notwithstanding anything contained in Sub-section (1), the expenditure deductible in any income year shall not be one hundred thousand rupees or five percent of the adjusted taxable income of such person for that year, whichever is the lesser.
3) Notwithstanding anything contained in Sub-sections (1) and (2), in any special situation, the Government of Nepal may, by notification in the Nepal Gazette, so specify that any amount spent or donated by any person for any work specified in that notification may be deducted fully or partly for expenditure, in determining the income of that person.

Securities Act 2063

Chapter 4 Exemptible Amounts and Other Exemptions

Section 12A: Expenses on heritage protection and sports development
In computing its taxable income in any income year, any company may make a claim to subtract an amount not exceeding ten lakh rupees or an amount to be set by ten percent of the assessable income, whichever is the lesser out of the expenditure made by it in that year in the protection and preservation of historical, religious and cultural heritage in Nepal or in the construction of public physical infrastructure of sports, upon prior approval of the Department.

Securities Act 2063

Chapter 4 Exemptible Amounts and Other Exemptions

Section12B: Expenses contributed to the Prime Minister’s Disaster Relief Fund and the Reconstruction Fund established by the Government of Nepal
Any person contributing any amount in any income year to the Prime Minister Natural Calamities Fund and Reconstruction Fund established by the Government of Nepal may deduct such amount in computing taxable income for that year.

Securities Act 2063

Chapter 4 Exemptible Amounts and Other Exemptions

Section 12C : Seed capital provided to start-up businesses
Any person making a grant of up to one lakh rupees as seed capital to each start-up business up to five in number except to the concerned person may deduct such amount as expenses in computing taxable income.
Securities Act 2063

Chapter 5 Deductible Amounts

Section 13 : General deduction
Any person may, for the purpose of computing his income from any business or investment in any income year, deduct the following expenditures related to the transactions subject to this Act:-
a)  Made in that income year,
b) Made by that person, and
c) Made in earning income from the business or investment.

Securities Act 2063

Chapter 5 Deductible Amounts

Section 14 : Interest deduction
1) Any person may, for the purpose of computing his income from any business or investment in any income year, deduct all interests chargeable in that year under the following debt liabilities created for the act of generating income from the business or investment of that person:-
a) If the debt liability has been created for having borrowed any amount, and that amount has been used in that year or used to buy any property used in that year, or
b) That debt liability has been created in any other circumstance.
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c) ….
2) Notwithstanding anything contained in sub-section (1), a resident entity controlled by an organisation entitled to tax exemption can deduct the interest if paid to the person controlling or the concerned person pursuant to sub-section (1) in any income year and such interest amount shall not exceed the total of the following amounts:
a) All interest amounts obtained in that year to be included in the computation of the taxable income of that entity, and
b) Fifty percent amount of the adjustable taxable income of that entity in that year, which has been computed excluding any interest derived by that entity or without deducting any interest paid by that entity.
3) Any interest not allowed to be deducted or not deducted pursuant to sub-section (2) may be carried forward or credited in the forthcoming income year.
Explanation:
For purposes of this Section, ” a resident entity controlled by an organisation entitled to tax exemption” means an entity which, being a resident entity in that year, is subject to a vested ownership or control of twenty-five percent or more of the following persons or organisations in any time of that year:-
(a) An organisation entitled to tax exemption and a person associated with that organisation,
(b) A person entitled to tax exemption pursuant to section 11 in that year or a person associated with that person,
(c) A non-resident person or a person associated with the non-resident person or
(d) Any combination of the persons referred to in clauses (a), (b) and (c).
1 Removed by the Financial Act, 2075.
Securities Act 2063

Chapter 5 Deductible Amounts

Section 16 : Repair and maintenance expenses
1) When computing the income of any business or investment in any income year, a person may deduct all expenses incurred in the repair and maintenance of the depreciable property owned and used in that year to earn income from that business or investment.
2) Notwithstanding anything contained in Sub-section (1), in deducting the expenses allowable under that sub-section, it shall not exceed seven percent of the depreciation base amount of the group of property remaining at the end of that income year.
Provided that no such limit shall be applicable to repair and maintenance expenses incurred in the testing of an aeroplane pursuant to the standards determined by the Civil Aviation Authority of Nepal by the person providing air transport service.
3) Any excess expense or part thereof on repair and maintenance which is not deductible because of the limit referred to in sub-section (2) may be added to the depreciation base amount of the group of the concerned property in the beginning of upcoming income year.

Securities Act 2063

Chapter 5 Deductible Amounts

Section 17 : Pollution control expenses
1)   For purposes of computing the income earned by any person from any business in any income year, such person may deduct the pollution control expenses to the extent incurred in the operation of that business in that year.
2) Notwithstanding anything contained in sub-section (1), in computing the limit of expenses deductible under that sub-section in any income year, it shall not exceed fifty percent of the adjustable taxable income of all businesses operated by such person.
3) Any excess expense or part thereof which is not deductible in excess of the limit referred to in Sub-section (2) may be capitalized and depreciated pursuant to Schedule II at the beginning of the upcoming income year.
Explanation: For purposes of this Section, “pollution control expenses” means the expenses incurred by any person related to any process for the purpose of controlling pollution or protecting or conserving the environment in other manner.
Securities Act 2063

Chapter 5 Deductible Amounts

Section 18 : Research and development expenses
1) For the purposes of computing the income earned by any person from any business in any income year, such person may deduct the research and development expenses to the extent incurred in the operation of that business in that year.
2) Notwithstanding anything contained in sub-section (1), in computing the limit of expenses deductible under that sub-section in any income year, it shall not exceed fifty percent of the adjustable taxable income of all businesses operated by such person.
3) Any excess expense or part thereof which is not deductible in excess of the limit referred to in sub-section (2) may be capitalized and depreciated pursuant to Schedule II at the beginning of the upcoming income year.
Explanation: For purposes of this Section, “research and development expenses” means the expenses incurred by any person for the purpose of controlling and developing his business and improving commercial production and process.
Provided that such expenses shall not include the cost at the time of acquiring any property referred to in sub-section (3) of Section 1 of Schedule II.

Securities Act 2063

Chapter 5 Deductible Amounts

Section 19 : Depreciation deduction expenses
1) For purposes of computing the income earned by any person from any business or investment in any income year, such person shall deduct depreciation pursuant to Schedule II in lieu of depreciation of the depreciable properties owned and used by that person in that year in making income from that business or investment.
2) Notwithstanding anything contained in sub-section (1), the following provisions shall be applicable in respect of the deduction for depreciation of the devices, equipment and other machineries installed by any entity in the projects which involve the construction and operation of public infrastructures and are transferred to Government of Nepal and in the projects on construction of powerhouses and generation and transmission of electricity:-
a) If the devices, equipment and other machineries installed previously become obsolete because of being old or worn and torn and new devices, equipment and other machineries have to be installed in lieu thereof, the value which remains by subtracting depreciation deduction until the income year from the cost of the property, which has become obsolete property because of being old or worn and torn, installed previously in that income year in which they were so installed may be deducted as expenses.
b) In respect of properties other than the old properties replaced pursuant to clause (a), if any value remains by subtracting depreciation deduction until the income year when a transfer takes place from the cost of those properties at the time when the entity transfers such a project to Government of Nepal, the entity may deduct such a remaining value as expenses.
Securities Act 2063

Chapter 6 Tax Accounting and Time

Section 22 : Method of tax accounting
1) The matter when any person gets any income or makes any expense shall be determined in accordance with the widely recognised accounting principle, subject to this Act.
2) A natural person shall, while computing the income to be earned from his employment and investment, maintain accounts on the cash basis, for purposes of tax.
3) A company shall maintain accounts on an accrual basis for purposes of tax.
4) Except if the Department has otherwise specified by issuing a notice in writing, any person may, for purposes of income tax, maintain accounts on the cash or accrual basis, subject to sub-sections (1), (2) and (3).
5) Any person may make an application to change the method of accounting for tax purposes, subject to sub-sections (2) and (3). If the Department thinks that it is necessary to change the method of accounting to clearly show the income of such person, the Department may give permission to change the method of accounting.
6) If the method of accounting of any person for purposes of tax is changed pursuant to sub-section (5) in computing the income of that person in the income year when such change is made, the adjustment has to be so made that no amounts out of those included, deducted or to be included or deducted are omitted or duplicated.

Securities Act 2063

Chapter 6 Tax Accounting and Time

Section 23 : Cash basis accounting
1) Any person shall, in maintaining accounts on the case basis of his income earned from employment, business or investment for tax purposes, subject to this Act, do as follows:-
(a) To treat as income only that which is received at the time when payment is received by him or made available to him and include it in his income.
(b) To deduct for expense only after he pays out.
Securities Act 2063

Chapter 6 Tax Accounting and Time

Section 24 : Accrual basis accounting
1) Any person shall, in maintaining accounts on the accrual basis of his income earned from business or investment subject to this Act, for purposes of tax, any income shall be included in the computation of his income, considering that any payment has been received immediately when the right to receive such payment is created.
2) For purposes of making a deduction in computing  income earned by any person as mentioned in sub-section (1), the following expenses shall be deemed to have been borne:-
a) If any payment involving such expenses has been made in lieu of a payment made by any other person, the expenses shall be deemed to have been borne in the following conditions:-
(1) The person has the liability to make that payment,
(2) The value of such liability can be ascertained in a realistic manner, and
(3) Payment has been received from another person.
b) In all other circumstances except those mentioned in clause (a), an expense shall be deemed to have been borne at the time when payment is made.
3) Notwithstanding anything contained in sub-section (1), the Department may recognise the accounting specified by the Nepal Rastra Bank with respect to the banking business, subject to the Nepal Rastra Bank Act, 2058 and prevailing laws relating to banking.
Provided that a cooperative organisation may keep an accounting of interest income on a cash basis.
4) Where, in computing on the accrual basis, the income earned by any person from a business or investment, any payment receivable by that person is included, or any payment to be borne by that person is deducted, and a difference occurs in the amount received or paid by that person because of,
inter alia,
the difference in the exchange rate, the difference has to be adjusted in receiving or making payment.
Securities Act 2063

Chapter 6 Tax Accounting and Time

Section 25 : Reverse of the amounts including bad debts
1) When maintaining accounts of the amounts received and expenses borne in the computation of the income earned by any person from any employment, business or investment, the person has to make proper adjustments at the time of reimbursement, recovery, relinquishment of claim, writing off, or remission in any of the following circumstances:-
a) Where the person pays back such amount or recovers the expense, as the case may be,
b) Where the accounts of the amount received have been maintained on the accrual basis, and the person subsequently relinquishes his right to receive that amount or where that amount is a debt claim of that person, and he writes off the debt as a bad debt, or
c) Where the accounts of the expense incurred have been maintained on the accrual basis, and the person subsequently relinquishes his liability to incur such expense or where that expense is a debt claim, the person for whom the debt is to be repaid remits the debt.
2) Any person may relinquish the right to receive any amount or to write off the debt liability of that person as a bad debt only in the following circumstances:-
a) In the case of a debt claim of any financial institution or bank, the debt claim is converted into a bad debt as per the specified criteria and
b) If, after having followed all proper measures to receive payment in circumstances other than those referred to in clause (a), that person is reasonably satisfied that the right or debt claim cannot be realised or recovered.

Securities Act 2063

Chapter 6 Tax Accounting and Time

Section 26 : Method of deriving average of amounts includible and deductible under long-term contract
1) For purposes of computing the income earned by any person from any employment, business or investment in any income year, the estimated amounts includible and deductible according to the sum of sequential increase as per the percentage of completion of the contract under the long-term contract of that person, shall be deemed to have been received or spent.
Explanation: For purposes of this section, “long-term contract” means a contract of the following nature”:-
(a) A contract with a validity period of more than twelve months, and
(b) A contract with a deferred consideration except a contract which is concluded for production, installation or construction or for the discharge for relevant services for each of such works or which does not contain such elements.
2) A contract with a deferred consideration, a contract to be included according to the sum of sequential increase, a contract to be deducted according to the sum of sequential increase, an excluded contract and a contract of completion percentage shall be as prescribed.