chhatramani/Nepal-Legal-Text-Corpus-44laws huggingface dataset:
Income Tax Act 2058

Preamble
Date of Royal Assent and Publication:
2058.12.19 (1 April 2002)
Amending Acts:
Date of Authentication and Publication
1. Some Nepal Laws Amendment Act, 2063(2006) 2063.06.28 (14 October 2006)
2. The Republic Strengthening and Some Nepal                                                                 2066.10.07 (21 January 2010)
Laws Amendment Act, 2066(2010)
3. Some Nepal Laws Amendment Act,2072(2016)                                                              2072.11.13 (25 February 2016)
4. The Financial Act, 2075(2018)                                                                                            2075. 03.32 (16 July 2018)
5. Some Nepal Laws Amendment Act, 2075(2019)                                                            2075.11.19 (03 March 2019)
6. The Financial Act, 2076 (2019)                                                                                          2076.03.30 (15 July 2019)
7. The Financial Act, 2077 (2020)                                                                                          2077.03.15 (29 June 2020)
8. The Financial Act, 2078 (2021)                                                                                          2078.06.13
9. The Financial Act, 2079 (2022)                                                                                          2079.03.31
10. The Financial Act, 2080(2023)                                                                                        2080.03.31
Act No. 22 of the year 2058(2002)
1
…….
An Act Made to Amend and Consolidate Laws Relating to Income Tax
Preamble:
Whereas it is expedient to make the law relating to income tax by amending and consolidating it in order to enhance revenue mobilisation by making the process of collecting revenue effective for the economic development of the country;
Now, therefore, it should be enacted by Parliament in the first year of the reign of His Majesty King Gyanendra Bir Bikram Shah Dev.
1 Deleted by the Republic Strengthening and Some Nepal Laws Amendment Act, 2006 (2010).

Income Tax Act 2058

Chapter 1 Preliminary

Section 1 : Short title and commencement
1) This Act may be called the Income Tax Act, 2058 (2002).
2) This Act shall come into force throughout Nepal and apply to the resident person in any place outside Nepal.
3) This Act shall come into force immediately.
Income Tax Act 2058

Chapter 2 Tax Bases

Section 3 : Tax to be levied
The tax shall be levied on each of the following persons in each income year and be collected  pursuant to this Act:
a) A person who has taxable income in any income year,
b) A non-resident person’s foreign permanent establishment situated in Nepal, which sends income of any income year pursuant to Sub-sections (3) and (4) of Section 68 and
c) A person who receives payment final tax withholding in any income year.
Income Tax Act 2058

Chapter 2 Tax Bases

Section 5 : Taxable income and classification of income headings
The taxable income of any person in any income year shall be equal to the amount computed by subtracting the amount, if any, claimed pursuant to Section 12, 12A,12B, 63 or all these Sections from the grand total amount of assessable income of each of the following income headings in that income year:
(a) Business,
(b) Employment,
(c) Investment, and
1
d) Windfall gain.
1 Inserted by the Financial Act, 2075.

Income Tax Act 2058

Chapter 2 Tax Bases

Section 6 : Assessable income
Subject to this Act, the following incomes earned by any person for any business, employment, investment or windfall gain in any income year shall be considered assessable income:
a) Income earned by any resident person from his employment, business or investment in that income year, irrespective of the place of his source of income and
b) Income earned in that income year by any non-resident person from employment, business or investment having an income source in Nepal.
Provided that the assessable income shall not include any income exempted from tax pursuant to section 11 or 64.

Income Tax Act 2058

Chapter 3 Computation of Tax

Section 7 : Computation of income from business
1) The profits and benefits made by any person in any year from any business shall be the income of that business of that person in that income year.
2) In computing the profits and benefits earned by any person from the business in any income year, it shall be computed so as to include the following amounts received by that person within that year:
a) Service charge,
b) Amount obtained from the disposal of stock-in-trade,
c) Net profit derived from the business property or business liability of any person computed pursuant to Chapter 8,
d) Amount considered to have been derived pursuant to clause (a) of Sub-section (2) of Section 4 of Schedule II from the disposal of depreciable property of the business,
e) Gift received from any person in respect of the business,
f) Amount received for having accepted any restriction in respect of the operation of the business,
g) Notwithstanding that the amount received by any person is of such nature that it is included in income from investment, the amount received by such a person being directly related to his business, and
h) Other amounts liable to be included pursuant to Chapter 6 or 7 or Section 56 or 60.
3) Notwithstanding anything contained in Sub-section (2), the amounts deductible under sections 10, 54 and 69 and payments from which tax is withheld finally may not be included in computing the profits and benefits derived from the operation of the business.
Income Tax Act 2058

Chapter 3 Computation of Tax

Section 8 : Computation of income earned from employment
1) The remuneration derived by any natural person from employment in any income year shall be computed as the income earned by that person 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) Amount for wages, salary, leave, amount for overtime work, fee, commission, prize, gift, bonus, and payment for other facilities
b) Payment for any personal allowance, including the amount for dear allowance, subsistence allowance, entertainment and transport allowance,
c) Payment received for settlement of or reimbursement of expenses incurred by his or her associated person for personal purposes,
d) Payment made for having given consent to any terms of employment,
e) Payment made for termination, loss of employment, or for compulsory retirement,
f) Retirement payment and retirement contribution, including the amount deposited by the employer for that employee in the retirement fund,
g) Other payments made in respect of employment and
h) Other amounts required to be included pursuant to Chapter 6 or 7.
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) Food and Tiffin provided by the employer to the employee at the work site in a manner that it is available to all employees on the same terms,
c) The settlement or reimbursement of the following expenditure incurred by any employee:
1) The expenditure fulfils the business purpose of the employer or
2)The expenditure exempted or to be exempted in the computation of the income earned from investment.
d) Payment of such petty amounts of which accounts are impracticable to be maintained or difficult to be maintained administratively as prescribed.
Explanation
: For purposes of this section, “payment” means the payment:-
(a) made by the employer,
(b) made by the associated person of the employer and
(c) made by any third person as referred to in the agreement made with the employer or his associated person.
Income Tax Act 2058

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.
Income Tax Act 2058

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
1
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.
2
i) Any income of the Government of Nepal, Provincial Government or Local Level,
2
j) Amounts earned by Nepal Rastra Bank in pursuance of its objective,
3
k) Amounts earned by water supply and sanitation consumer organisations registered as per the Water Resources Act 2049 in pursuance of its objective,
4
l) The amount earned by the Collective Investment Fund (Mutual Fund) approved by the Nepal Securities Board in accordance with its purpose,
4
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.
Income Tax Act 2058

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

Income Tax Act 2058

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.

Income Tax Act 2058

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.

Income Tax Act 2058

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.

Income Tax Act 2058

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.
Income Tax Act 2058

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.

Income Tax Act 2058

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.
1
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.
Income Tax Act 2058

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.

Income Tax Act 2058

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.
Income Tax Act 2058

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.

Income Tax Act 2058

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.