chhatramani/nepal_legal_acts_corpus_english huggingface dataset:
Mutual Legal Assistance Act, 2014

Provided that, if the property was obtained by committing an offence or was used in committing an offence, it shall be confiscated.

(3) If the value of the property to be confiscated is expressed in a currency other than Nepali currency, for the purpose of determining the claim amount under this Act, such value shall be converted into Nepali currency based on the foreign exchange rate determined by Nepal Rastra Bank on the day the petition pursuant to Section 29 was filed in the court. 37. Special Provisions Relating to Enforcement of Judgments of Foreign Courts: (1) Notwithstanding anything contained elsewhere in this Act, a foreign state or foreign party wishing to obtain recognition of a judgment of a civil nature rendered by a foreign court or to enforce such judgment in Nepal shall file a petition in the concerned Court of Appeal, attaching the following documents:-

(a) A certified full copy of the judgment,

(b) If the judgment was rendered in the absence of any party, the original or certified copy of the document establishing that such party was validly served with summons,

(c) All documents establishing that the judgment fulfills the conditions under Clauses (b) and (c) of Sub-section (2),

(d) A copy of the full text of the judgment translated into the Nepali language, certified by the concerned diplomatic or consular representative or a person authorized to make official translations.

(2) Upon studying the documents received with the petition pursuant to Sub-section (1), if the judgment rendered by the foreign court appears to fulfill the following conditions, the concerned Court of Appeal shall recognize the judgment of the foreign court and send it to the concerned District Court for enforcement:-

(a) If such judgment appears to have been rendered by a competent court having proper jurisdiction,

(b) If such judgment is enforceable in the concerned country,

(c) If such judgment is final according to the law of the concerned country and is not subject to review. Explanation: For the purpose of this Section, "concerned District Court" means the District Court of the area where the property, including the amount to be recovered, property to be partitioned, or property to be used under the judgment, is located.

(3) Notwithstanding anything contained in Sub-section (2), a judgment rendered by a court of a foreign country shall not be recognized in Nepal, and such judgment shall not be enforceable within Nepal,
Income Tax Act, 2002

Income Tax Act, 2058

Royal Seal and Publication Date
2058.12.19
Certification and Publication Date
2063.06.28

Amending Acts

1. Some Nepal Laws Amendment Act, 2063
2. Republic Strengthening and Some Nepal Laws Amendment Act, 2066 2066.10.07
3. Some Nepal Acts Amendment Act, 2072 2072.11.13
4. Finance Act, 2075 2075.03.32
5. Some Nepal Acts Amendment Act, 2075 2075.11.19
6. Finance Act, 2076 2076.03.30
7. Finance Act, 2077 2077.03.15
8. Finance Act, 2078 2078.06.13
9. Finance Act, 2079 2079.03.31
10. Finance Act, 2080 2080.03.31
11. Finance Act, 2081 2081.04.01
12. Finance Act, 2082 2082.03.30

Act No. 22 of the Year 2058

An Act Made to Amend and Consolidate Laws Relating to Income Tax

Preamble: Whereas, it is expedient to amend and consolidate laws relating to income tax and make them up-to-date by making the process of revenue collection effective for the economic development of the country and enhancing revenue mobilization;

Now, therefore, Parliament has enacted this Act in the first year of the reign of His Majesty King Gyanendra Bir Bikram Shah Dev. Chapter - 1

Preliminary

1. Short Title, Extent and Commencement: (1) This Act may be called the "Income Tax Act, 2058".

(2) This Act shall apply throughout Nepal Deleted by the Republic Strengthening and Some Nepal Laws Amendment Act, 2066. and shall also apply to a resident individual wherever residing outside Nepal Deleted by the Republic Strengthening and Some Nepal Laws Amendment Act, 2066..

(3) This Act shall come into force immediately. 2.
Income Tax Act, 2002

2. Definitions: In this Act, unless the subject or context otherwise requires,-

(a) "Person deducting tax at source" means a person who has the duty to deduct tax at source under Chapter-17 while making payment of employment, investment return, service fee, and contract or agreement.

(b) "Officer" means the Director General, Deputy Director General, Chief Tax Administrator, Director, Chief Tax Officer, Tax Officer and other officers as mentioned in Section 72 in the Department.

(c) "Payment subject to final withholding tax" means dividend, rent, profit, interest, and payment liable to tax deduction made to a non-resident person as mentioned in Section 92.

(d) "Pension Fund" means an entity established solely for the purpose of accepting retirement contribution amounts and investing such amounts for the purpose of providing retirement payments from the fund to a beneficiary natural person or his/her dependent.

(e) "Retirement Payment" means a payment given to the following persons:-
 (1) Payment given to a natural person upon his/her retirement, or
 (2) Payment given to the dependent of a natural person upon his/her death.

(f) "Retirement Contribution Amount" means a payment made to a pension fund for the arrangement of a retirement payment or for the future arrangement thereof.

(g) "Incapacitated Person" means a person who is not capable of managing his/her own affairs due to physical or mental illness. Amended by Finance Act, 2075.(h) "Income" means income received by a person from employment, business, investment or casual gain, and the term also denotes the total amount of such income calculated in accordance with this Act.
Income Tax Act, 2002

Provided that this term shall not denote the original tax assessment replaced by a revised tax assessment under Section 101. Added by Finance Act, 2075.(p1) "Turnover" means total turnover equivalent to the total amount included under Section 7, 8 or 9 for the purpose of calculating income from employment, business or investment for an income year.

(q) "Non-resident Person" means a person other than a resident person. Amended by Finance Act, 2075.(r) "Non-business Chargeable Asset" means land, building, and an interest or security in any entity, excluding the following assets:-
 (1) Business asset, depreciable asset or trading stock,
 (2) A private building of a natural person in the following circumstances:-
 (a) Continuously held in ownership for ten years or more, and
 (b) Such person has resided therein, either continuously or intermittently, for a total of ten years or more,
 Explanation: For the purpose of this clause, "private building" means the building, the land occupied by the building, and additional land equal to the area occupied by the building or one ropani of land, whichever is less.
 (3) An interest of a beneficiary in a pension fund,
 (4) Land, real estate and private building disposed of by a natural person for a value less than ten lakh rupees, or
 (5) Property disposed of by transfer in a manner other than purchase or sale within three generations. Amended by Finance Act, 2078.(s) "Exempted Institution" means the following entities:-
 (1) The following entities registered with the Department as an exempted institution:-
 (a) Public nature social, religious, educational or charitable institutions established for non-profit purposes,
 (b) Amateur sports associations formed to promote social or sports facilities without benefit to members,
 (2) A political party registered with the Election Commission,
 Provided that if any benefit is provided to any person from the assets of such institution or from amounts received by such institution, except when the activities of the exempted institution are completed according to its objectives or when making any payment for assets or services provided to such institution by any person, such institution shall not be entitled to tax exemption under this clause.

(t) "Trust" means an arrangement where a trustee holds property.
Income Tax Act, 2002

Amended by Finance Act, 2075.Ω(af) "Rent" means all payments, including premiums, made under lease and rental of tangible assets including house rent. Provided that this term shall not denote a payment made for natural resources or amounts received by a natural person, other than a sole proprietorship, as house rent.

(ag) "Payment" means the following acts:-
 (1) If the money or property of one person is transferred to the name of another person, and the liability of another person is transferred to the name of that person,
 (2) If property created by one person comes into the ownership of another person after its creation, or if the burden of one person's liability is borne by another person,
 (3) If one person provides a service to another person,
 (4) If property owned by one person is used or made available for use by another person.

(ah) "Distribution of Profit" means the distribution of profit of an entity including the capitalization of profit under Section 53.

(ai) "Unit Trust" means a trust where a trustee holds property for the benefit of at least twenty persons, and the right of persons to participate in income or capital is divided on a basis determined by the number of units held. Amended by Finance Act, 2062.÷(aia) "Contribution-based Retirement Payment" means a payment which includes an amount deposited in an approved pension fund out of income included in the income of a natural person, and the amount accrued on such amount.

(aj) "Employment" means any kind of past, present or future employment.

(ak) "Royalty" means any payment made under a lease of an intangible asset, and the term also denotes any payment for the following purposes:-
 (1) Having the use or the right to use copyright, patent, design, model, plan, secret formula or process, or trademark,
 (2) Furnishing technical knowledge,
 (3) The use or the right to use cinematograph films, video tapes, sound recordings or any other similar medium, and using or furnishing industrial, commercial or Amended by Finance Act, 2075.Ωscientific experience,
 (4) Furnishing any assistance auxiliary to matters under sub-clause (1), (2) or (3), or
 (5) Agreeing to total or partial restrictions concerning matters under sub-clause (1), (2), (3) or (4). Provided that this term shall not denote a payment for natural resources. Amended by Finance Act, 2075.Ω(al) "Investment" means the act of holding or investing in one or more assets, excluding the following:-
 (1) The act of holding property brought into personal use by the person owning the property,
 (2) Employment or business.
Income Tax Act, 2002

Amended by Finance Act, 2075.Ω(al) "Investment" means the act of holding or investing in one or more assets, excluding the following:-
 (1) The act of holding property brought into personal use by the person owning the property,
 (2) Employment or business. Provided that the act of holding a non-business chargeable asset shall be deemed as investment.

(am) "Life Insurance" means any of the following insurances:-
 (1) Insurance effected in respect of an event related to the death of the insured person or a related person of the insured person,
 (2) Insurance related to an event of personal injury or specific incapacity of the insured person or his/her related person,
 Provided that the insurance contract must be for a term of at least five years or without a time limit, and cannot be terminated by the insurer before a period of five years except in specific circumstances mentioned in the contract, before any payment is made.
 (3) Insurance effected where an amount or series of amounts are to be paid to the insured in the future,
 (4) Reinsurance of insurance under sub-clause (1), (2) or (3), and
 (5) Reinsurance of reinsurance mentioned in sub-clause (4).

(an) "Dividend" means a distribution from an entity.

(ao) "Resident Person" means, in relation to an income year, the following persons:-
 (1) In the case of a natural person,
 (a) Whose ordinary place of abode is in Nepal,
 (b) Who Deleted by Finance Act, 2075. is present in Nepal for 183 days or more within a continuous period of 365 days, or
 (c) Who is deputed abroad by the Government of Nepal at any time during the income year.
 (2) A partnership firm,
 (3) In the case of a trust, a trust which,-
 (a) Is established in Nepal,
 (b) Whose trustee is a resident person during the income year, Added by Finance Act, 2075. or,
 (c) Is controlled, directly or through one or more interposed entities, by a resident person or a group of related persons during the income year.
 (4) In the case of a company, a company which,-
 (a) Is incorporated under the law of Nepal, Added by Finance Act, 2075. or,
 (b) Whose effective management is in Nepal during an income year.
Income Tax Act, 2002

Added by Finance Act, 2075.(4a) Government of Nepal or Provincial Government,
 Added by Finance Act, 2075.(5) Rural Municipality, Municipality or District Coordination Committee,
 (6) In the case of a foreign government or a provincial Added by Finance Act, 2075. or local government under that government, such entity which,-
 (a) Is established under the law of Nepal, or
 (b) Whose effective management of such entity is in Nepal during an income year.
 (7) An institution or entity established under a treaty agreement, and
 (8) A foreign permanent establishment of a non-resident person located in Nepal.

(ap) "Person" means a natural person or an entity.

(aq) "Manager" means a person involved in making managerial decisions of an entity, and the term also denotes the trustee of a trust and a person who has ownership in a foreign permanent establishment.

(ar) "Business" means any type of industry, trade, profession or similar nature of commercial transactions, and the term also denotes similar past, present or future businesses. Provided that this term shall not denote employment.

(as) "Interest" means the following payments or benefits:-
 (1) Payment under a debt obligation excluding principal,
 (2) Benefit obtained through discount, Amended by Finance Act, 2075. discount under a debt obligation, premium, swap payment or similar payments, and
 (3) Amounts under Section 31 considered as interest in payments made to a person by a person acquiring property under an annuity or installment sale, or for the use of any property under a financial lease.

(at) "Trading Stock" means stock of property owned by a person to be sold in the course of a regular business operated by him/her, property in the course of progress, and materials to be incorporated into property, Deleted by Finance Act, 2075.. Provided that this term shall not denote property held in foreign currency.

(au) "Business Asset" means any asset used in a business. Provided that this term shall not denote trading stock or a depreciable asset of the business.

(av) "Distribution" means a distribution from an entity as mentioned in Section 53.
Income Tax Act, 2002

Provided that this term shall not denote trading stock or a depreciable asset of the business.

(av) "Distribution" means a distribution from an entity as mentioned in Section 53. Added by Finance Act, 2075.(ava) "Electronic Medium" means computer, fax, email, internet, electronic cash machine, fiscal printer, and the term also denotes other approved means specified by the Department.

(aw) "Income Remitted Abroad" means income required to be remitted abroad by a foreign permanent establishment of a non-resident person located in Nepal under Section 68, which has been remitted abroad through a bank or paid in any other manner.

(ax) "Foreign Income Tax" means foreign income tax imposed by a foreign country as mentioned in sub-section (8) of Section 69, and the term also denotes a final withholding tax imposed by a foreign country.

(ay) "Foreign Permanent Establishment" means an entity under Amended by Finance Act, 2075. sub-clause (5) of clause (x).

(az) "Department" means the Inland Revenue Department.

(ba) "Foreign Currency Asset" means an asset held in foreign currency other than Nepalese Rupees.

(bb) "Permanent Establishment" means a place of business through which a person carries on business wholly or partially, and the term also denotes the following places:-
 (1) A place where a person carries on business wholly or partially through an agent, other than a general agent acting in an independent capacity in the ordinary course of business,
 (2) A place where the main equipment or main machinery of a person is located or used or installed,
 (3) One or more places in a country where a person, through employees or otherwise, provides technical, professional or consultancy services for more than ninety days, at once or intermittently, within any twelve-month period, or
 (4) A place where a person is engaged in a construction, installation or establishment project for ninety days or more, and a place where activities related to the supervision of such project are carried out.
Income Tax Act, 2002

Deleted by Finance Act, 2082.(5)

(bc) "Asset" means any kind of tangible or intangible asset, and the term also denotes currency, goodwill, technical knowledge, estate, ownership or interest in a foreign branch of a person, the right to earn or receive income in the future, and any part of any such asset.

(bd) "Related Person" means one or more persons or a group of such persons who act according to the intention of another person, and the term also denotes the following persons:-
 (1) A natural person and his/her relative or any person or his/her partner,
 (2) A foreign permanent establishment and the person having ownership in such establishment, and
 (3) An entity which, by itself or together with another related person or associate entity or any other person or entity related to such associate entity, controls or benefits from fifty percent or more of the income, capital or voting rights of an entity. Provided that the following persons shall not be related persons:-
 (1) Employees,
 (2) Persons specified by the Department as not being related persons. Added by Finance Act, 2075.(bda) "Adjusted Taxable Income" means taxable income calculated for an income year of a person without deducting any amount under Sections 12 Added by Finance Act, 2080., 12a, 12b and 12g, and without deducting under sub-section (2) of Section 14, Section 17 or Section 18, while calculating the taxable income.

(be) "Partnership" means a firm having less than twenty partners, whether registered under prevailing law or not. Provided that this term shall not denote a registered or unregistered sole proprietorship or joint venture.

(bf) "General Insurance" means insurance other than life insurance.

(bg) "General Interest Rate" means an interest rate of fifteen percent per annum.

(bh) "Approved Pension Fund" means a pension fund which has obtained approval from the Department under sub-section (1) of Section 63.

(bi) "Service Fee" means any fee paid to a person at market value for a service provided by him/her, and the term denotes Deleted by Finance Act, 2078. meeting allowance, management fee or technical service fee as well.

(bj) "Shareholder" means a beneficial owner of a company.

(bk) "Depreciable Asset" means an asset used in a business or investment for earning income, whose value depreciates due to breakage, obsolescence or efflux of time. Provided that this term shall not denote trading stock.

(bl) "Beneficiary" means a person having an interest under clause (y) Amended by Finance Act, 2075. in an entity.

(bm) "Prescribed" or "As Prescribed" means prescribed or as prescribed in the rules made under this Act. Chapter-2

Basis of Taxation

3.
Income Tax Act, 2002

Provided that this term shall not denote trading stock.

(bl) "Beneficiary" means a person having an interest under clause (y) Amended by Finance Act, 2075. in an entity.

(bm) "Prescribed" or "As Prescribed" means prescribed or as prescribed in the rules made under this Act. Chapter-2

Basis of Taxation

3. Charge of Tax: Tax under this Act shall be levied and collected on each of the following persons for each income year:-
(a) A person having taxable income in an income year,
(b) A foreign permanent establishment located in Nepal of a non-resident person which, under sub-sections (3) and (4) of Section 68, remits income abroad in an income year, and
(c) A person receiving payment subject to final withholding tax in an income year. 3a. 4. Computation of Tax and Rate of Tax: Amended by Finance Act, 2075.(1) The amount of tax payable by a person mentioned in Section 3 for an income year shall be equal to the total amount of tax payable by that person in the capacity of one or more persons mentioned in clauses (a), (b) and (c) of that Section.

(2) In computing the tax payable by a person under clause (a) of Section 3, the applicable rates mentioned in Schedule-1 shall be applied to the taxable income of that person for that income year.
Income Tax Act, 2002

In computing tax in this manner, any tax credit claimed by that person under Section 51 or 71 Added by Finance Act, 2075. or both Sections shall be deducted.

(3) Notwithstanding anything written in sub-section (2), the tax payable by a resident natural person under clause (a) of Section 3 who fulfills all the following conditions shall be equal to the total amount of tax deducted under Section 87 from payments made by the employer to such resident natural person in that income year:-
(a) The income for that income year includes only income from employment sourced in Nepal,
(b) All employers in that income year are resident persons and there is only one employer at a time, and
(c) The person has claimed deduction only for medical treatment expenses paid by the employer and retirement contributions paid by the employer, and has not claimed deduction for charitable expenses under Section 12.

(4) Notwithstanding anything written in sub-section (2), the tax payable in an income year by a resident natural person under clause (a) of Section 3 who fulfills all the following conditions shall be equal to the amount mentioned in sub-section (7) of Section 1 of Schedule-1:-
(a) In that income year, the person has only income from business sourced in Nepal,
(7a) The person has not claimed tax credit under Section 51 for medical treatment expenses and under Section 93 for tax deducted at source,
Amended by Finance Act, 2078.(b) Taxable income from business is up to three hundred thousand rupees and business turnover does not exceed thirty million rupees,
(c) Deleted by Finance Act, 2078
(d) Deleted by Finance Act, 2078

(74a) Notwithstanding anything written in sub-section (2), the tax payable in an income year by a resident natural person under clause (a) of Section 3 who fulfills the following conditions on the basis of turnover shall be equal to the amount calculated according to the rate specified in sub-section (17) of Section 1 of Schedule-1:-
(a) In that income year, the person has only income from business sourced in Nepal,
Amended by Finance Act, 2080.(b) Taxable income from business is up to ten lakh rupees and business turnover is more than thirty lakh rupees Amended by Finance Act, 2080.and up to one crore rupees,
(c) Deleted by Finance Act, 2075
(d) The income is not from consultancy and specialist services provided by natural persons including doctors, engineers, auditors, legal practitioners, players, artists, consultants.
Income Tax Act, 2002

Added by Finance Act, 2082.(4k) "Notwithstanding anything written in sub-sections (4) and (4a)", the person must have opted for this provision to apply for that income year.

(5) In computing the tax payable by a foreign permanent establishment under clause (b) of Section 3, the rate mentioned in sub-section (6) of Section 2 of Schedule-1 shall be applied to the income remitted abroad by such establishment in that income year.

(6) The tax payable by a person under clause (c) of Section 3 shall be equal to the total amount calculated by applying the rates mentioned in Amended by Finance Act, 2075.Sections 87, 88, 88a. and 89 to each payment subject to final withholding tax received by such person in that income year. 5. Taxable Income and Classification of Heads of Income: The taxable income of a person for an income year shall be equal to the amount calculated by deducting from the total aggregate amount of assessable income under each of the following heads of income for that year any amount claimed under Amended by Finance Act, 2080.Sections 12, 12a., 12b., 12g., 63 or all of these:-
(a) Business,
(b) Employment, Deleted by Finance Act, 2075
Amended by Finance Act, 2075.(c) Investment, and
Added by Finance Act, 2075.(d) Casual Gain. 6. Assessable Income: Subject to this Act, the following income of a person from any employment, business, investment or casual gain for an income year shall be deemed as assessable income:-
(a) Income from employment, business, investment or casual gain of a resident person, wherever the source of income may be, and
(b) Income from employment, business, investment or casual gain of a non-resident person, where the source of income is in Nepal. Provided that any income exempted under Section 11 or 64 or both Sections shall not be included in assessable income. Chapter-3

Computation of Income

7. Computation of Income from Business: (1) The profits and gains of a person from carrying on a business in an income year shall be the income of that person from that business for that year.
Income Tax Act, 2002

Chapter-3

Computation of Income

7. Computation of Income from Business: (1) The profits and gains of a person from carrying on a business in an income year shall be the income of that person from that business for that year. Amended by Finance Act, 2075.(2) In computing the profits and gains of a person from carrying on a business in an income year, the following amounts received by that person within that year shall be included in the computation:-
(a) Service fees,
(b) Amount from disposal of trading stock,
(c) Net gain from the disposal of a business asset or business liability of a person calculated under Chapter-8,
(d) Amount deemed to have been received under clause (a) of sub-section (2) of Section 4 of Schedule-2 from the disposal of a depreciable asset of the business,
(e) Gift received from any person in relation to the business,
(f) Amount received for accepting any restriction in connection with carrying on the business,
(g) Amount received by a person which, although of a nature to be included in income from investment, is received in direct connection with his/her business, and
(h) Other amounts required to be included under Chapter-6 or 7 or Section 56 or 60.

(3) Notwithstanding anything written in sub-section (2), amounts exempt under Sections 10, 54 and 69 and payments subject to final withholding tax shall not be required to be included in computing the profits and gains from carrying on a business. 8.
Income Tax Act, 2002

8. Computation of Income from Employment: (1) The remuneration received by a natural person from employment in an income year shall be deemed as the employment income of that person for that year and shall be computed accordingly.

(2) The following payments given by an employer to a natural person in an income year shall be included in computing the remuneration from employment of such natural person for that income year:-
(a) Wages, salary, leave pay, overtime pay, fees, commission, award, gift, bonus and payments for other facilities,
(b) Payment of any personal allowance including dearness allowance, cost of living allowance, house rent allowance, entertainment or transport allowance,
(c) Payment received by way of settlement or reimbursement of expenses incurred by him/her or his/her related person for personal purposes,
(d) Payments made for agreeing to any condition of employment,
(e) Payments made on termination, loss or compulsory retirement of employment,
(f) Retirement payments and retirement contributions including amounts deposited by the employer in a pension fund for such employee,
(g) Other payments made in relation to employment, and
(h) Other amounts required to be included under Chapter-6 or 7.

(3) Notwithstanding anything written in sub-section (2), the following shall not be required to be included in computing the remuneration from employment of a natural person:-
(a) Amounts exempt under Section 10 and payments subject to final withholding tax,
(b) Food and refreshments provided by the employer at the workplace to employees on equal terms available to all employees,
(c) Settlement or reimbursement of expenses incurred by an employee:-
 (1) If such expenses serve the business purpose of the employer, or
 (2) Expenses that are exempt or will be exempt in the computation of income from the natural person's business or investment,
(d) Payment of small amounts as prescribed, where maintaining accounts is impractical or administratively difficult. Explanation: For the purpose of this Section, "payment" means payment made:-
(a) By the employer,
(b) By a related person of the employer, and
(c) By any third person according to an agreement with the employer or his/her related person. 9. Computation of Income from Investment: (1) The profits and gains of a person from investment in an income year shall be the income of that person from such investment for that year.
Income Tax Act, 2002

9. Computation of Income from Investment: (1) The profits and gains of a person from investment in an income year shall be the income of that person from such investment for that year. Amended by Finance Act, 2075.(2) In computing the profits and gains of a person from making an investment in an income year, the following amounts received by that person in that year shall be included:-
(a) Dividend, interest, payment for natural resources, rent, royalty, gain from life insurance, gain from an interest in a pension fund not approved under sub-section (1) of Section 63, or retirement payment made from an approved pension fund,
(b) Net gain from the disposal of a non-business chargeable asset of such investment of that person calculated under Chapter-8,
(c) In disposing of a depreciable asset of the investment made by that person, the excess amount, if any, of proceeds (incomings) over the residual value including expenditures (outgoings) for assets in a pool of depreciable assets under clause (a) of sub-section (2) of Section 4 of Schedule-2,
(d) Gift received by that person in relation to the investment,
(e) Retirement payments and retirement contributions including amounts deposited in a pension fund for that person in relation to the investment,
(f) Amounts received for accepting any restriction in relation to the investment, and
(g) Other amounts required to be included under Chapter-6 or 7 or Section 56.

(3) Notwithstanding anything written in sub-section (2), the following shall not be included in computing the profits and gains of a person from investment:-
(a) Amounts exempt under Sections 10, 54 and 69 and payments subject to final withholding tax, and
(b) Amounts included in computing the income of that person from employment or business. Chapter-4

Exempt Amounts and Other Exemptions

10.
Income Tax Act, 2002

Chapter-4

Exempt Amounts and Other Exemptions

10. Exempt Amounts: Tax shall be exempt on the following amounts:-
(a) Amount of tax exemption received by any person entitled to tax exemption facility as mentioned in a bilateral or multilateral treaty or agreement Amended by Finance Act, 2075. made between the Government of Nepal and any foreign state or international organization,
(b) Amount received by a natural person for employment in the government service of a foreign state,
 Provided that,
 (1) Such person must be a resident or non-resident solely by reason of such employment, and

७(३ख) खनिज, आर्थिक ऐन, २०७७ द्वारा संशोधित । पेट्रोलियम पदार्थ, प्राकृतिक ग्याँस तथा इन्धन अन्वेषण तथा उत्खनन गर्ने कारोबार गर्ने व्यक्तिले सम्वत् २०८० साल चैत्र महिनासम्म व्यापारिक रूपमा कारोबार सञ्चालन गरेमा कारोबार सञ्चालन गरेको मितिले पहिलो सात वर्षसम्म पूरै आयकर छुट पाउनेछ र त्यसपछिको तीन वर्षसम्म पचास प्रतिशत आयकर छुट पाउनेछ । ७(३ख) A person carrying on business of exploration and extraction of minerals, Amended by the Finance Act, 2077. petroleum products, natural gas and fuel, who commences commercial operation up to the month of Chaitra of the year 2080, shall receive full income tax exemption for the first seven years from the date of commencement of operation, and fifty percent income tax exemption for the subsequent three years.

७(३ग) नेपाल सरकारले नेपाल राजपत्रमा सूचना प्रकाशन गरी तोकेको आर्थिक ऐन, २०७७ द्वारा संशोधित । प्राणीशास्त्र सम्बन्धी (जुलोजिकल), भूशास्त्र सम्बन्धी (जियोलोजिकल), जीवप्रविधि (बायोटेक) सम्बन्धी पार्क सञ्चालन, प्रविधि पार्क र सूचना प्रविधि पार्कभित्र स्थापित सफ्टवेयर विकास, तथ्याङ्क प्रशोधन, साइबर क्याफे, डिजिटल म्यापिङ सम्बन्धी उद्योगको आयमा लाग्ने करको आर्थिक ऐन, २०८२ द्वारा संशोधित । पचहत्तर प्रतिशत छुट हुनेछ । ७(३ग) There shall be a seventy-five percent exemption on the tax leviable on the income of industries related to operation of zoological, geological, biotech parks, technology parks, and software development, data processing, cyber cafes, digital mapping established within information technology parks, as specified by the Government of Nepal by publishing a notice in the Nepal Gazette, Amended by the Finance Act, 2077. Amended by the Finance Act, 2082.

आर्थिक ऐन, २०७८ द्वारा थप । ७(३घ) विद्युतको व्यापारिक कारोबार गर्ने व्यक्तिलाई देहाय बमोजिम कर छुट हुनेछ :

Added by the Finance Act, 2078.७(३घ) A person carrying on commercial business of electricity shall be entitled to tax exemption as follows:

(क) आर्थिक ऐन, २०८० द्वारा संशोधित । सम्वत् २०८४ साल चैत्र महिनासम्म जलविद्युत, सौर्य, वायु तथा जैविक पदार्थबाट उत्पादन हुने विद्युतको व्यापारिक रुपमा उत्पादन, प्रसारण वा वितरण सुरु गर्ने अनुमति प्राप्त व्यक्तिले व्यापारिक कारोबार सुरु गरेको मितिले पहिलो दश वर्षसम्म पूरै र त्यसपछिको पाँच वर्षसम्म पचास प्रतिशत आयकर छुट पाउनेछ । (क) Amended by the Finance Act, 2080.
Income Tax Act, 2002

Where a special industry, information technology industry and industry related to the tourism sector capitalizes its retained profits into shares for the expansion of the capacity of the same industry, there shall be one hundred percent exemption on the dividend tax leviable on such capitalization as dividend distribution.

आर्थिक ऐन, २०८२ द्वारा झिकिएको । Deleted by the Finance Act, 2082

७(३ड) पचास करोड रूपैयाँ वा सोभन्दा बढी चुक्ता पूँजी भएको प्राइभेट कम्पनीको रुपमा सञ्चालनमा रहेको आर्थिक ऐन, २०८० द्वारा संशोधित । कुनै कम्पनी पब्लिक कम्पनीको रुपमा परिणत भई कारोबार सञ्चालन गरेमा त्यसरी पब्लिक कम्पनीको रुपमा परिणत भएको मितिदेखि तीन वर्षसम्म लाग्ने करमा दश प्रतिशत छुट हुनेछ । ७(३ड) If a company operating as a private company with a paid-up capital of fifty crore rupees or more Amended by the Finance Act, 2080. is converted into a public company and carries on business, there shall be a ten percent exemption on the tax leviable for three years from the date of such conversion into a public company.

तर, कम्पनी ऐन, २०६३ को दफा १२ बमोजिम पब्लिक कम्पनीको रुपमा संस्थापन हुनुपर्ने कम्पनीले यस उपदफा बमोजिमको सुविधा पाउने छैन । Provided that, a company which is required to be established as a public company under section 12 of the Companies Act, 2063 shall not be entitled to the facility under this subsection.

७(३ढ) स्वदेशी चिया उत्पादन र प्रशोधन गर्ने उद्योग, दुग्ध पदार्थको कारोबार गर्ने डेरी उद्योग र कपडा उत्पादन गर्ने उद्योगले आफ्नो उत्पादन बिक्री गरी प्राप्त गरेको आयमा लाग्ने आयकरको दरमा पचास प्रतिशतले छुट हुनेछ । ७(३ढ) There shall be a fifty percent exemption on the rate of income tax leviable on income derived from the sale of their products by industries engaged in domestic tea production and processing, dairy industries dealing in milk products, and industries producing textiles.

७(३ण) सामुदायिक संस्थाबाट सञ्चालन गरिएका स्वास्थ्य संस्थाको करयोग्य आयमा लाग्ने करमा बीस प्रतिशत छुट हुनेछ । ७(३ण) There shall be a twenty percent exemption on the tax leviable on the taxable income of health institutions operated by community organizations.

७(३त) लघु उद्यमलाई व्यवसाय वा कारोबार सुरु गरेको मितिले आर्थिक ऐन, २०७५ द्वारा थप । सात वर्षसम्म लाग्ने आयकर पूर्ण रूपमा छुट हुनेछ । यस्तो लघु उद्यम महिला उद्यमीबाट सञ्चालन भएमा थप आर्थिक ऐन, २०७७ द्वारा संशोधित । तीन वर्ष लाग्ने आयकर पूर्ण रूपमा छुट हुनेछ । ७(३त) A micro enterprise shall be fully exempt from income tax leviable for seven years from the date of commencement of business or operation, Added by the Finance Act, 2075.
Income Tax Act, 2002

If such a micro enterprise is operated by a female entrepreneur, there shall be full exemption from income tax for an additional three years, Amended by the Finance Act, 2077.

आर्थिक ऐन, २०७६ द्वारा थप । ७(३थ) कुनै आय वर्षमा कुनै निकायले सार्वजनिक पूर्वाधार संरचनाको निर्माण तथा सञ्चालन गरी नेपाल सरकारलाई हस्तान्तरण गर्ने जस्ता आयोजनाहरू र विद्युत गृह निर्माण, उत्पादन र प्रसारण गरेमा त्यस्तो निकायलाई सो निकायको करयोग्य आयमा लाग्ने करमा बीस प्रतिशतले छुट हुनेछ । Added by the Finance Act, 2076.७(३थ) If in any income year an entity constructs and operates public infrastructure structures and transfers them to the Government of Nepal, and constructs, generates and transmits power houses, such entity shall be entitled to a twenty percent exemption on the tax leviable on its taxable income.

आर्थिक ऐन, २०७८ द्वारा थप । ७(३द) औद्योगिक क्षेत्र वा औद्योगिक ग्राममा स्थापना वा स्थानान्तरण भई सञ्चालनमा रहेको विशेष उद्योगलाई उत्पादन शुरू भएको मितिले तीन वर्षसम्म लाग्ने करमा पचास प्रतिशत र त्यसपछिको पाँच वर्षसम्म पच्चीस प्रतिशत छुट हुनेछ । Added by the Finance Act, 2078.७(३द) A special industry established or relocated and operating in an industrial area or industrial village shall be entitled to a fifty percent exemption on the tax leviable for three years from the date of commencement of production, and a twenty-five percent exemption for the subsequent five years.

आर्थिक ऐन, २०७८ द्वारा थप । ७(३ध) स्वदेशमा उत्पादन गरेको कच्चा पदार्थ वा सहायक कच्चा पदार्थ विशेष उद्योगलाई बिक्री गरी प्राप्त गरेको आयमा लाग्ने करमा बीस प्रतिशत छुट हुनेछ । Added by the Finance Act, 2078.७(३ध) There shall be a twenty percent exemption on the tax le

(3) Notwithstanding anything contained in sub-section (2), for the purposes of that sub-section, a person may use the average exchange rate specified by the Department for that income year, provided that the Department has issued a notice in writing and granted permission. Amended by the Finance Act, 2075.29. Indirect payment: Where a person indirectly benefits from a payment made by the payor or a person related to the payor, or where another person is designated to receive the payment, the Department may, by issuing a notice in writing, treat the person who so benefits or who designates such other person as the recipient of that payment. 30. Jointly owned investment: For the purpose of calculating income derived by a person from an investment jointly owned with another person, the amounts to be included or deducted in calculating the income shall be apportioned on the basis of the proportionate share of each joint owner in that investment. 31.
Income Tax Act, 2002

Jointly owned investment: For the purpose of calculating income derived by a person from an investment jointly owned with another person, the amounts to be included or deducted in calculating the income shall be apportioned on the basis of the proportionate share of each joint owner in that investment. 31. Characterization of compensation payments: Where a person or a person related to that person receives any compensation amount, including insurance payments, in respect of the following matters, such compensation amount shall, at the time of receipt, be included in calculating income from employment, business, or investment, as the case may be:-
(a) compensation for any income that the person has received or may receive from any business, employment, or investment, or for any amount included in the calculation of such income; or
(b) compensation for any loss incurred or likely to be incurred by the person in any business or investment, or for any expenditure amount deductible in calculating the person's income.

(1) Compensation payment received for physical injury from a personal accident of a resident natural person shall not be included in income, and no tax credit shall be claimed under section 51 for expenses incurred in the treatment of such injury.
(2) Compensation amount received upon the death of a natural person shall not be included in income. 32. Characterization of payments under annuities, installment sales, and financial leases: (1) A payment made to a person under an annuity or installment sale by the person acquiring the property, or for the use of any property under a financial lease, shall be treated as consisting of an interest component and a capital repayment component under a debt claim in accordance with this section.
(2) All payments under sub-section (1) shall be aggregated and the total sum thereof shall be divided into two parts as follows:-
(a) a capital part equal to the market value of the property at the time of granting the annuity, the installment sale of any property, or the leasing under a financial lease, as the case may be; and
(b) an interest part being the remainder after deducting the capital part from the total sum of all payments under sub-section (1).
(3) At the time of granting the annuity, installment sale, or financial lease Deleted by the Finance Act, 2075., when determining the installments, the capital part and the interest part shall be clearly separated, and a total payment schedule shall be provided.
Income Tax Act, 2002

If such a schedule cannot be provided, the interest and capital parts shall be apportioned among the payments under sub-section (1) by treating the annuity, installment sale, or financial lease as a mixed debt with interest being compounded semi-annually.
(4) For payments under sub-section (1) treated as a mixed debt, the debtor shall pay, at the time of each payment, an interest portion calculated on the outstanding principal (capital) balance, with the interest rate remaining constant throughout the term of the debt, and the debtor shall partially repay the principal and partially pay the interest.
(5) For a financial lease under this section, the following conditions must be fulfilled:-
(a) The lease agreement provides for the transfer of ownership upon expiry of the lease term or grants the lessee an option to purchase the property at a fixed or predetermined price after the lease term ends;
(b) The lease term exceeds seventy-five percent of the useful life of the property;
(c) The estimated market value of the property after the expiry of the lease term is less than twenty percent of the market value of the property at the commencement of the lease;
(d) For a lease commencing before the last twenty-five percent of the useful life of the property, the present value of the minimum lease payments at the commencement of the lease term is equal to or greater than ninety percent of the market value of the property at that time; or
(e) The property is specially designed for the lessee and, after the expiry of the lease term, is not practically usable by any person other than the lessee.
(6) Each payment under sub-section (1) shall be divided into two parts under sub-section (3), and the interest part shall be treated as interest paid or payable under a debt claim, and the capital part shall be treated as a repayment of capital.
(7) The lessee under a financial lease shall be treated as the owner of the leased property, and the lessor shall be treated as having a debt claim against the lessee.
(8) The present value of lease payments shall be calculated using a discount rate equal to the normal interest rate. Explanation: For the purposes of this section, "lease term" shall also include any additional period for which the lessee has the option to renew the lease. 33.
Income Tax Act, 2002

Explanation: For the purposes of this section, "lease term" shall also include any additional period for which the lessee has the option to renew the lease. 33. Transfer pricing and other arrangements between related persons Amended by the Finance Act, 2062.: (1) Where an arrangement exists between related persons, the Department may, by issuing a notice in writing, distribute, allocate, or apportion amounts to be included or deducted in calculating the income of those persons in such a manner as to reflect the taxable income or tax payable that would have arisen for them if the arrangement had been conducted on an arm's length basis.
(2) In doing anything under sub-section (1), the Department may:-
(a) recharacterize the source and nature of any income, loss, amount, or payment; or
(b) where a person incurs various expenses, including head office expenses, for operating a business from which related person or persons benefit, apportion such expenses among the related persons on a comparative turnover basis. Added by the Finance Act, 2081.(3) The method for evaluating transfer pricing between related persons under this section shall be as determined by the Department. 34. Splitting of income: (1) Where a person attempts to split income with another person, and it appears that this results in a reduction of the tax payable, the Department may, by issuing a notice in writing, adjust the amounts to be included or deducted in calculating the income of each person to prevent the reduction of liability.
(2) The situations referred to in sub-section (1) shall also include cases where a person, directly or indirectly through one or more intermediaries, attempts to split income with a related person by transferring the following amounts, and the purpose of such transfer is to reduce the tax payable by that person or the related person:-
(a) amounts to be received or expenses to be incurred; or
(b) amounts received or consumed by the person to whom any property is transferred, or expenses incurred or payments made by that person in respect of ownership of such property.
(3) In determining whether a person has attempted to split income under sub-section (2), the Department shall use the market value of any payment made for the transfer. 35. General anti-avoidance rule: For the purpose of determining tax liability under this Act, the Department may:-
(a) recharacterize any arrangement or part of an arrangement that is or has been entered into as part of a tax avoidance scheme;
(b) disregard any arrangement or part of an arrangement that has no substantial economic effect; or
(c) recharacterize any arrangement or part of an arrangement that lacks substance.