Returns, payments and refunds in Nepal

Not if, during the fiscal year, they worked for only one employer at a time and had no income other than that employment. However, a natural person with annual income above NPR 40 lakh must file a return regardless.

A person with employment income from two places must file a return.

Self-assessed tax must be paid within the deadline for filing the return, that is by the end of Ashwin of the following fiscal year.

If your only other income is from payments subject to final withholding at source, such as house rent, interest, dividends, meeting allowances, occasional teaching, retirement payments or investment insurance payments, you do not need to file a return. If you have other income from industry, trade, profession, business or investment, you must file a return.

A natural person with income above NPR 40 lakh in an income year must file a return under section 96. A resident with less than that, whose only income is employment income from one employer at a time and who is not claiming a donation deduction, does not need to file. In all other cases a return must be filed.

A natural person whose only income is salary below NPR 40 lakh a year, from one employer at a time, and who is not claiming a donation deduction, does not need to file. The employer withholds and deposits tax from each monthly salary payment. A person earning more than NPR 40 lakh a year in salary must file the D-4 return.

Where the advance tax is not a final tax, you must still file a return. Final taxes include tax on business-unrelated rent, interest and dividends and on salary of a resident natural person. Not filing attracts a fee. If tax is also still due with the return, interest is charged at 15%.

Once you become aware of an error in any return or document you filed, you can inform the relevant office and file an amended return within 30 days of the date the return was filed. After 30 days, an amended return cannot be filed.

Within three months of the end of the income year, that is by the end of Ashwin of the following fiscal year. If you cannot file on time, apply to the relevant Large Taxpayer Office, Medium Level Taxpayer Office, Inland Revenue Office or Taxpayer Service Office for an extension of up to three months.

There are separate return formats for natural persons and for entities, and separate schedules for employment, business, investment and gains on disposing of non-business taxable assets. Natural persons who choose presumptive tax use a separate form. Different schedules and statements are required depending on the heads of income and the size of the business. Guides on using and completing the forms and schedules are provided with the forms, and all forms and guides can be downloaded from the Inland Revenue Department's website.

From any office under the Inland Revenue Department, or by downloading them from www.ird.gov.np.

A person earning taxable income in an income year declares their own income on the forms prescribed by the Inland Revenue Department, calculates the tax due under the Act themselves, and pays it.

40% of the estimated tax by the end of Poush, 70% by the end of Chaitra, and 100% by the end of Asar.

1. 1Open ird.gov.np in Mozilla Firefox and click Taxpayer Portal.
2. 2Select Estimated Return, then click Estimated Return Entry.
3. 3To get a submission number, enter a username, password, PAN, fiscal year (always the current fiscal year for estimated tax) and contact number, and click Register.
4. 4With the submission number, click Proceed, enter the estimated turnover and revenue payment details, and click Save.
5. 5To edit a saved return, click Estimated Return Login in the Estimated Return folder and log in with the submission number, username and password.
6. 6Check the details and click Submit. The Save and Submit buttons are then disabled and only Print is enabled.
7. 7Print the return and have it verified at the relevant Large Taxpayer Office, Medium Level Taxpayer Office, Inland Revenue Office or Taxpayer Service Office, or verify it yourself with a self-verification username and password.

The return is not treated as filed until verified, so verify it within the deadline. Help is available from the Help menu.

The format is available at www.ird.gov.np, and the return can be filed electronically. Obtain a user ID and password from the relevant Large Taxpayer Office, Medium Level Taxpayer Office, Inland Revenue Office or Taxpayer Service Office.

The Large Taxpayer Office, Medium Level Taxpayer Office, Inland Revenue Office or Taxpayer Service Office where you are registered.

If the first estimate was wrong, or later information clarifies the business position, a revised estimate can be filed with the second or third instalment to correct the earlier one. If accuracy falls below 90%, interest is charged on the shortfall. A revised estimate applies only to the instalments still due. If the department is not satisfied with the estimate or revised estimate, the relevant office can revise it based on tax paid in the previous income year, and the taxpayer must then pay instalments based on the department's revised estimate.

The taxpayer prepares the annual estimated tax return with the first instalment, without an auditor, and calculates instalments from it. As with a normal return, estimate income separately from employment, business and investment, work out assessable and taxable income, and calculate tax without deducting the medical tax credit. The estimate must be at least 90% accurate. If the error is greater, and the tax paid is less than 90% of the tax payable, interest is charged on the shortfall.

Both. Failing to file the instalment or estimated tax statement attracts a fee of NPR 5,000 per statement or 0.01% of the assessable income in the return, whichever is higher. A person who does not pay instalments on time, or pays less than 90% of the tax due under the annual return, pays interest at the standard rate of 15% a year on the shortfall up to the annual return deadline, the end of Ashwin of the following fiscal year.

A person with assessable business or investment income in an income year pays: in the first instalment, 40% of estimated tax less amounts already paid; in the second, 70% less amounts paid; in the third, 100% less amounts paid.

Turnover tax payers pay in two instalments:

By the end of Poush

tax on turnover up to 20 Poush at the prescribed rate

By the end of Asar

tax on actual turnover to 20 Asar plus estimated turnover to the end of Asar, less the amount paid by the end of Poush

Three: the first by the end of Poush, the second by the end of Chaitra, and the third and final by the end of Asar. Turnover tax payers pay in two: by the end of Poush and by the end of Asar.

Anyone other than those with only employment income, that is anyone with assessable business or investment income in an income year. Instalments are not required if the total annual amount is less than NPR 7,500. Instalments are also not required for payments subject to final withholding, for resident natural persons who choose presumptive tax with taxable income up to NPR 3 lakh or turnover not above NPR 30 lakh, or for natural persons who own hire vehicles.

The estimate must be at least 90% accurate.

No fee is charged, but there must be no outstanding tax due.

To the head of the relevant tax office, or to the Inland Revenue Department.

• An application setting out the details, with a NPR 10 stamp affixed
• Where a return is required, the return filed and the assessed tax paid
• No outstanding returns or tax dues from previous fiscal years
• Where financial statements are required, the financial statements and the payment voucher for the tax due
• For employment income, the employer's statement of income and tax deposited
• Anything else the office specifies

Taxpayers filing the D-01 return can fill in the D-01 return and revenue deposit form directly at a bank counter when paying presumptive tax, and then print the tax clearance certificate themselves from the online system, without visiting the tax office.

The certificate is issued once all tax shown in the taxpayer's self-assessment return and financial statements has been paid. If a tax audit, investigation or other process later establishes additional income beyond what was declared, the taxpayer remains liable to pay tax on it.

A taxpayer can obtain one as and when they need it.

File your return or financial statements as required by the Act, pay all tax due, and then apply to the relevant office with the required documents. Taxpayers filing the D-01 return do not need to visit the Inland Revenue Office or Taxpayer Service Office: after filling in the D-01 return and revenue deposit form at a bank counter and paying the presumptive tax, they can print the certificate themselves from the online system.

A certificate issued at the taxpayer's request confirming that, up to a stated date, they have filed all returns and financial statements required by the Act and paid all tax due.

The relevant offices under the Inland Revenue Department.

Medical expense tax credit in excess of tax due, and foreign tax credit.

To the head of the relevant office, or to the Inland Revenue Department.

Apply to the relevant office with documents proving the overpayment.

The office where the taxpayer is registered.

The refund is paid with interest at the standard rate set by the Income Tax Act.

• Within 5 years of the end of the income year in which the overpayment arose
• Within 5 years of the date the excess amount was paid
• Within 5 years of the date of a court decision

When a person has paid more tax than their liability and has no other outstanding tax due, the excess is refunded.

Excess tax can be credited against tax due in future. To do this, submit the tax credit claim form with your income tax return. Otherwise, you can apply for a refund.

You can claim a refund where you paid more than the tax due. If the refund is delayed, it is paid with interest at the same rate you would pay for late tax, 15% a year, provided a claim was made.

Tax must be paid under the revenue heading classified for that type of tax. The revenue codes in force from 01/04/2076 are:

• 11111 Tax on sole proprietorship and personal income
• 11112 Remuneration tax: tax on salary, wages, allowances and benefits, retirement payments, other employment payments, and income from sources such as teaching
• 11113 Capital gains tax (individuals and sole proprietorships): gains from selling, leasing or transferring houses, land, shares and other assets
• 11120 Tax on entity income: parent heading, deposits cannot be made to it
• 11121 Profit tax, government enterprises: bodies wholly or majority (more than 50%) owned by the Government, or under its management control
• 11122 Profit tax, public limited companies: public companies registered under a special Act or the Companies Act, and companies less than 50% government-owned
• 11123 Profit tax, private limited companies: private companies under the Companies Act and companies designated under the Income Tax Act
• 11124 Profit tax, other entities: partnerships, cooperatives, trusts, associations, foreign companies and other entities not covered by 11121 to 11123
• 11125 Capital gains tax, entities
• 11126 Windfall gains tax, entities: lotteries, gifts, donations, inheritances, prizes and similar
• 11129 Other taxes on entity income
• 11130 Tax on investment and other income: parent heading, deposits cannot be made to it
• 11131 Tax on income from renting or leasing property: houses, land, vehicles and other immovable property rented, leased or let on long-term contract
• 11132 Tax on interest
• 11133 Tax on dividends
• 11134 Tax on other investment income
• 11115 Windfall gains tax: gambling, lotteries, betting, gifts, donations, inheritances, informant rewards, prizes and similar
• 11139 Tax on other income not covered above
• 11211 Social security tax on remuneration
• 11442 Health service tax: health services other than those of government and community hospitals
• 11443 Education service tax, educational institutions: prescribed services of private educational institutions
• 11444 Education service tax, foreign study: service fee on tuition fees paid by students going abroad
• 11454 Road construction and maintenance tax: collected by vehicle type at the Transport Management Office on registration
• 14214 Telecommunication service charge
• 14215 Telephone ownership charge
• 33311 VAT, production: VAT payable by producers selling goods they produce
• 33313 VAT, sale and distribution of goods: VAT payable by wholesalers and retailers
• 33314 VAT, consultancy and contracts: all contract businesses and consultancy services, including contract tax outstanding from before VAT was introduced
• 33315 VAT, tourism services: hotels, travel agencies, trekking and rafting, including hotel tax outstanding from before VAT
• 33316 VAT, communication, insurance, air travel and other services: all communication services except the government postal service, insurance and other prescribed services, air flight tax, and entertainment tax outstanding from before VAT
• 33317 VAT collected from non-registered persons: reverse-charge VAT on services from unregistered persons outside Nepal, VAT on timber sales, and VAT collected and deposited by local levels, international organisations and missions in Nepal, the Government, or public enterprises dealing in VAT-exempt goods
• 33331 Excise, tobacco products
• 33332 Excise, liquor, including wine and soft drinks
• 33333 Excise, beer
• 33334 Excise, other industrial products not covered by 33331 to 33333

Following the Government of Nepal's decision of 14/11/2074 to introduce electronic payment as an alternative channel for all revenue collection, the department has implemented electronic payment for tax.

Before paying electronically you need:

1. 1A self-verification username and password issued by the Inland Revenue Office.
2. 2A Connect IPS account from Nepal Clearing House Limited, the Government's designated payment service provider, registered online with a username and password and linked to your bank account.

To create a payment voucher:

1. 1Go to www.ird.gov.np.
2. 2Click Taxpayer Portal, then double-click General under Integrated Tax System.
3. 3Click Taxpayer Login under General.
4. 4Log in with your credentials.
5. 5Click Proceed To Payment.
6. 6Enter the voucher details to generate a voucher code (the Revenue Payment Request Slip):

• Choose the revenue type (income tax, VAT, excise, or other such as education service fee or health risk tax), the revenue heading (for example 11111 or 33113), the income year (for example 2075/076), and what the payment is for (return, assessment, fee and so on), and enter the amount.
• For income tax, select whether it is TDS: Yes or No.
• For VAT, enter the amount and select whether it is extra collection (EC): Yes or No.
• Click Add to prepare the voucher line for that heading. Repeat for other headings to pay several at once.
• Choose a suitable revenue-collecting bank from the list for the office where your PAN is held (Large Taxpayer Office, Medium Level Taxpayer Office, Inland Revenue Office or Taxpayer Service Office).
• Click Generate Transaction Code to produce the request slip, check the heading, amount and fiscal year, and click Confirm.

1. 1You can print the request slip and pay at any branch of the chosen bank.

To pay directly online (e-payment):

1. 1Click Make Payment, choose the payment processor, and log in to Connect IPS. If you do not have a Connect IPS account: go to www.connectips.com and click Sign Up; enter a username, password, mobile number and email; verify the account with the codes sent to your mobile and email; go to Link Bank Account, fill in your account details and download the form; then have the link verified at your bank.
2. 2Choose the debit account and click Submit.
3. 3Nepal Clearing House Limited sends a one-time password (OTP) to your registered mobile and email. Enter it and click Confirm. When your account is debited, a Debit Success page appears, and the request slip shows that the debit succeeded, that the details will update within a few minutes once the amount reaches the revenue account, and that you can print the voucher and take it to the office.
4. 4Once the amount is credited to the bank account in the name of the Financial Comptroller General Office, the status changes to Credit Success. This currently takes about 5 minutes.
5. 5Status of earlier payment requests: Pending means payment not initiated; In Progress means debited from the taxpayer's account; Completed means credited to the FCGO account.
6. 6This completes electronic payment of revenue.

Where the revenue heading, income year, depositor's name, address or PAN is wrong, contact the relevant tax office, the bank and the District Treasury Controller Office to correct it. This should normally be done within the same fiscal year, and at the latest by the end of Ashwin of the following fiscal year.

At banks authorised for government transactions, an Inland Revenue Office, Taxpayer Service Office, Medium Level Taxpayer Office or Large Taxpayer Office.

Withholding tax

within 25 days of the end of the month of payment

Instalment tax

by the end of Poush, Chaitra and Asar

Self-assessed tax

within the return filing deadline, by the end of Ashwin of the following fiscal year

Assessed tax, interest and fees

within the time stated in the notice

It can be corrected only if you apply before last year's central accounts are reconciled, at the latest by the end of Ashwin of the current fiscal year. Otherwise it cannot be changed; in that case pay the income tax again and adjust the VAT amount in the next tax period.

Within the time stated in the notice of assessment.

A return is selected for detailed examination or investigation only if a quick review finds it inaccurate, if risk indicators show revenue risk, or if the taxpayer's compliance is poor. If you declare your income correctly and keep the records required by the Income Tax Act and directives up to date, your return is not likely to be selected for full audit or investigation.

The Income Tax Act 2058 is built entirely on self-assessment, because the taxpayer knows their own transactions best. It is not optional. Returns and statements must be filed, certified by a financial or tax auditor where required. For small and medium taxpayers, particularly natural persons, there are simplified returns, the option of presumptive tax, and final withholding where no return is required. The department does not assess tax on a reasonable basis in place of self-assessment. If a taxpayer required to self-assess does not file, the department treats the return as filed and tax as paid on the due date (the end of Ashwin of the following fiscal year) and can investigate and issue an amended assessment. Separate interest, fees or fines then apply for not filing and not paying.

your responsibility ends once the return is filed and tax paid on time. You do not need to ask the office to assess your tax. The taxpayer's self-assessment is treated as the final assessment. If the department finds an error on reviewing the return, it issues an amended assessment, and in that case a final assessment is made only after your return has been examined according to law and you have been given notice and a fair opportunity to be heard.

A taxpayer with annual business or investment profit above NPR 1 crore, or above NPR 50 lakh for professionals, must have a tax audit certifying all statements and schedules. Tax auditors are listed with the Institute of Chartered Accountants of Nepal. The Inland Revenue Department does not approve tax auditors, so its approval is not required.

Under the policy allowing taxpayers to verify their own submissions, go to the relevant Inland Revenue Office or Taxpayer Service Office and obtain a self-verification username and password.

If your self-verification username and password are the same, the return will not verify. Before verifying, go to the General folder in the Taxpayer Portal, open the Change Password menu, and change your password.

Then click Login in the General folder, enter your username and password, choose the relevant Income Tax module, and select the submission number of the return you filed.

From the Login menu you can view and print your submitted income tax returns, see all your submissions on one page, and verify them as needed.

To file the D03 income tax return online:

1. 1Open ird.gov.np in the Mozilla Firefox browser.
2. 2Click Taxpayer Portal on the home page.
3. 3Select the Income Tax folder.
4. 4Click the D03-Return Entry menu.
5. 5To get a submission number, enter a username, password, PAN, fiscal year (always choose a past year, because a return is filed after the income year ends) and contact number, then click Register.
6. 6You will be told your submission number. Click Proceed and enter the details: select the taxpayer category and type, for example couple or single natural person (for a personal PAN), and complete Schedules 5, 6, 7, 8 and 13.
7. 7Upload the audit report (financial statements) by clicking the link for uploading other mandatory documents. Files must be PDF or JPG and no larger than 1 MB.
8. 8To edit a saved return, click Tax Return Login in the Income Tax folder, enter the submission number and the username and password used to obtain it, log in and complete the return.
9. 9Check all the details you entered and, if correct, click Submit and confirm that the return was submitted.
10. 10Once submitted, the Save and Submit buttons are disabled and only Print is enabled.
11. 11Print the return and have it verified at the relevant Large Taxpayer Office, Medium Level Taxpayer Office, Inland Revenue Office or Taxpayer Service Office, or verify it yourself if you have a self-verification username and password.

The return is not treated as filed until it is verified, so have it verified within the deadline.

Help is available from the Help menu.

To file a PAN suspension or cancellation: select Close of Business D03 in the Income Tax folder, and fill in, submit and verify the details following the same steps as return entry. For Close of Business D03, select the current fiscal year.

The Inland Revenue Department offers e-filing, so taxpayers with a PAN can file their return online by logging in at www.ird.gov.np. E-payment is also available following the department's prescribed process.

1. 1Open www.ird.gov.np in Mozilla Firefox and click Taxpayer Portal.
2. 2Select the Income Tax folder and click D01-Return Entry.
3. 3To get a submission number, enter a username, password, PAN, fiscal year (always a past year, since the return is filed after the income year ends) and contact number, and click Register.
4. 4With the submission number, click Proceed, enter the turnover and revenue payment details, and click Save.
5. 5To edit a saved return, click Tax Return Login in the Income Tax folder and log in with the submission number, username and password.
6. 6Check the details and click Submit. Save and Submit are then disabled and only Print is enabled.
7. 7Print the return and have it verified at the relevant Inland Revenue Office or Taxpayer Service Office, or verify it yourself with a self-verification username and password.

The return is not treated as filed until verified, so verify it within the deadline. Help is available from the Help menu.

Under the policy allowing taxpayers to verify their own returns, obtain a self-verification username and password from the relevant Inland Revenue Office or Taxpayer Service Office.

If your self-verification username and password are the same, the return will not verify, so first go to General in the Taxpayer Portal, open Change Password, and change it.

Then click Taxpayer Login under General, log in, choose the VAT or Income Tax module, select the submission number of your return, enter the previous VAT due amount if required, and verify.

From Taxpayer Login you can view and print all your income tax and VAT returns, verify them, view the VAT audit trail report, pay tax by e-Payment, or prepare a payment voucher.

Registering once is enough. For security, change the password yourself from time to time.

You enter your own username and password each time you take a submission number. The same username and password can be used permanently.