Nepal’s New Tax Policy Comes into Effect

Nepal’s new tax policy has come into effect from the start of the new fiscal year 2083/84. The policy aims to simplify the tax system, increase investment in the private sector, promote industries and businesses, and make the banking system more effective.

The most significant change is in the personal income tax, where the threshold for the 1% tax rate has been increased from 500,000 rupees to 1 million rupees. The maximum personal income tax rate has also been reduced from 39% to 29%. The new tax rates are as follows: 1% for income up to 1 million rupees, 10% for income between 1 million and 1.5 million rupees, 20% for income between 1.5 million and 2.5 million rupees, 27% for income between 2.5 million and 4 million rupees, and 29% for income above 4 million rupees.

The government has also reduced the customs duty rates from 11 to 7 tiers. Additionally, 273 types of industrial raw materials have been exempted from customs duty, which is expected to reduce the production cost of industries.

The inland revenue system has also undergone significant changes, with 360 items now exempt from inland revenue. However, some luxury items such as liquor, cigarettes, and junk food will attract higher inland revenue.

A new integrated green tax has been introduced, which includes road maintenance fees and other environmental taxes. The government has also introduced a 40% subsidy for farmers who invest up to 2 million rupees in agricultural production and commercialization.

The capital market will also see some changes, with the introduction of intraday trading, short selling, and derivative trading. The final tax on capital gains from the sale of listed company shares has also been introduced.

Other new taxes and fees that have come into effect include a 3% education equality fee on private educational institutions, a 3% health equality fee on private health services, and a 5% value-added tax on household electricity consumption above 50 units.

A 2% luxury tax will also be levied on five-star hotels, luxury resorts, and imported liquor. The annual royalty for mini-casinos has been increased from 1.5 million rupees to 3 million rupees.

Additionally, a 0.5% skill promotion fee will be levied on the purchase of gold and silver jewelry. Ride-sharing services will also attract a 5% service charge.

The Nepal Rastra Bank’s monetary policy for the fiscal year 2083/84 has also come into effect, which aims to increase credit flow and stabilize interest rates.