If an industry diversifies itself through reinvestment in the some or any other industry or expands its installed capacity by 25 percent or more, modernises its technology or develops ancillary industries, it is entitled to a deduction of 40 percent on the amount spent for acquiring new additional fixed assets from its taxable income. Such amount may be deducted on a lump sum or on an installment basis from the tax to be paid within a period of three years. If an industry installs technology which controls pollution and minimizes the environment effects it is granted a rebate of 50 percent of its investment from taxable income. Such deduction are allowed on a lump sum or on an installment basis within a period of three years. Pre-operation cost of an industry for skill development training is allowed to be capitalised.
Income tax is exempted on dividends earned through investment in the industry.
A foreign investor is levied income tax of a rate of 15 percent only, on the income earned from technical as well as management service fees and royalty. No income tax is imposed to a foreign investor on the interest income earned from foreign loan. Industry providing employment to six hundred or more than six hundred Nepali citizens round the year, get additional facilities of income tax rebate at the rate of ten percent of their tax for that year. Profits earned from export is exempted from income tax.