The Twelveth Budget of the Federal Democratic Republic of Nepal was presented by Honorable Finance Minister Dr. Yubraj Khatiwada by way of Finance Bill on Jestha 15, 2077 (May 28, 2020) for the F/Y 2077/78 i.e., 2020/21. Find the PDF copy of the Finance act 2077/78(2020/21) of Nepal.
Also, find the budget Nepal 2077-78
The Direct Tax provisions contained in the Finance Bill shall generally apply to F/Y ending Ashadh 31, 2078 (July 16, 2021) unless specifically stated otherwise.
Further, other provisions shall be applicable w.e.f. from Jestha 15, 2077, or Shrawan 01, 2076, as the case may be.
Key Highlight of Budget 2077/78 from a Business perspective.
|Source of Fund (Arab)||Budget Allocation (Arab)|
|Tax Revenue collection 889 Billion||889.62||Current expenditure||948.94|
|Foreign aid||60.52||Capital expenditure||352.91|
|Foreign loan:||299.5||Debt service||172.79|
- Entrepreneurs will be provided a loan at 2% interest rate for startups from BFIs
- Farmers will be provided the facility of the credit card.
- Migrants who are interested to do self agriculture can now initiate business via “LandBank”. Migrants can use land in the lease and hence, will get consensus in agricultural inputs. Rs 50 crores allocated for share investment in Land Bank.
- Co-operatives will be encouraged to go cashless and to be merged. Sana Kisan Bikas Bank will be lent Rs 3.60 arba in order to provide assistance to several co-operative.
- Industries will be provided 50% rebate in electricity use during the lockdown.
- Industries and public transportation that have been affected due to COVID will get an extension in insurance.
- The commodity market will be brought into functioning.
- Capital market scope to be enhanced by introducing debt management and stock dealers functioning will be encouraged
- National payment gateway to be implemented
- NEPSE will be made completely digitized
- Company registration and dissolution will be made easier.
- Women Entrepreneurship to be established
Tax Amendment by finance act 2077/78 (i.e 2020/21)
Income tax Amendment 2077/78
There is no change in income tax for a salaried person except for clarification regarding exemption on SSF contribution by the couple and basic exemption so the slab rate for employment will remain the same.
Income tax waiver
|Failed to file an income tax return and pay Tax|
|Natural person-Not registered||If registered under PAN and pay tax /file return for f.y 2074/75 &75/76 before falgun end 2077||Interest and earlier year tax|
|Natural Person-Pan registered and turnover <50L||submit a return and pay tax and 25% of interest before falgun end 2077 for f.y 73/73,74/75,75/76||Earlier tax and interest|
|All other natural person entity and who fail to file a return for f/y on or before 2073/74||submit the return and pay tax and 25% of interest||Additional fine and penalty|
|water and sanitation consumer society||all income tax-related dues|
Income tax Rebates
|Presumptive taxpayer 4(4)||75% of Tax (i.e d1-2500/4000/7500)|
|Turnover based tax 4(4ka)||50 % of Tax (i.e d2)|
|Turnover up to 1crore||25% of income tax|
|Hotel/travel/trekking/transport(air and road)||20% of income tax|
- The deduction allowed on Contribution to corona infection, prevention, control, and treatment fund established all three levels of government.( f.y 2076/77..)
- The deduction allowed on payment to casual labor up to 3000 even without PAN. ( f.y 2076/77..)
- The deduction allowed on payment related to forest, agriculture, animal, and other domestic Goods to a natural person not engage in business even without PAN. (for f.y 2076/77)
- Pan requirement for allowing expense is increased from 1000 to 2000. (for f.y 2076/77)
- Again additional depreciation of 1/3rd will be allowed for special industries, Entities involved in building and operation of the road, bridge, tunnel, ropeway, railway or overhead bridge, Entities involved in building and operation of the road, bridge, tunnel, ropeway, railway or overhead bridge.(for f.y 2076/77…)
- Where a person makes opting as a couple makes a contribution to Contribution-based Social Security Fund, 1% tax on basic exemption limit is not applicable (now 1% will not apply to all if SSF contribution made)
Tax on Co-operative
- Incomes earned by agro and forest-based cooperative involved in activities as prescribed in 11(2) without the mechanical power.11(2)-NO tax
- cooperative societies operated in Rural Municipality established pursuant to Cooperatives Act, 2074 11(2)-No tax
- Co-operative operated in the municipality Sch 1 2(3)–5%
- Co-operative operated in the sub-metropolitan Sch 1 2(3)–7%
- Co-operative operated in the metropolitan Sch 1 2(3)-10%
- IF Transport service provider or transport rental provider is registered for Value Added Tax then 1.5 Withholding tax will apply in place of 2.5 % percent
- In respect of payment of interest on loans in foreign currency obtained for the purpose of investment in sectors prescribed by Nepal Rastra bank, where the interest is by the resident bank and financial institutions to a foreign bank, 10 percent Withholding tax will apply now.
- Withholding tax shall not be applicable where a consumer receives reward amounts pursuant to prevailing law as a result of making payment through electronic payment medium including payment card, digital wallet, mobile banking at the time of purchase of goods or services
- Withholding Tax @ 5% on Repair of aircraft and other is removed from the line of “5% on
Repair of aircraft and othercontract and agreement” under sec 89 (3) (Ka).
- under section 11 (3) (Kha) line is modified as “Where special industries are operated in a highly undeveloped (remote), undeveloped, underdeveloped area, there shall be the applicability of 10%, 20% and 30% of the applicable tax rate respectively for ten years from the date of commercial operation”
- under section 11 (3) (ga) and tourism industry (except casino) is added along with the special industry and 2Billion +300 individual required in place of 1Billion +500 individual for special industry and tourism industry (except casino) currently in commercial operation, where such industry increases its capital investment to at least (benefits of 5-year exemption and 3-year 50% is available to tourism industry also)
- 11 (3Kha) ” and fuel” is added
- 11 (3Ga) “technology park, biotech park” is replaced with “geological, zoological, biotech-related park operation”
more to be updated
Value Added Tax (VAT) Amendment in finance act 2077/78
- Vat registered person fails to File return until Ashad 2075. if pay tax,50% of interest, and file return before 2077 Falgun end then an additional fine will be waived.
- Automatic registration cancellation for that VAT-registered person who has not submitted return until 2073 Ashad and penalty will be waived.
- The business of Scrap is removed from the list of “Mandatory VAT Registration for Operation of Stipulated Business.” under section 10(2)(kha)
Motor parts, legal, Tailoring with shirting suiting materials, municipalityis deleted from section 10(2)(kha) i.e now if the person involved in transaction listing in 10(2) other then Motor parts, legal, Tailoring with shirting suiting materials in METROPOLITAN CITY and SUB-METRO
and AREAS PRESCRIBED BY IRD only within the preview of compulsory registration.
- If vat withholds by the government or other public institutions is not adjusted within if remains excess after offsetting for a continuous period of 4 months then the contractor at his will shall submit an application to the tax officer for refund. the refund shall be made within 60 days from the date of application (25(ga)(1)).
- VAT paid on the purchase of raw materials, auxiliary raw materials and packing materials utilized in the production of medicine from the domestic industry by medicine industry is refundable in trimester basis by making an application to the Tax officer
- Where a person breaches the order of registration of tax officer under Section 5B or sub-sec (1) or (2) of Section 10 or fails to get registered under Section 10 (1) or Sec. 10Kha (1), then the penalty will increase from Rs. 10,000 to 20,000 for each tax period.
- Where a person who is required to register conducts transactions without registration then tax officer may levy penalty up to 50% of the principal amount to such person.
- The liquor, Beer or Cigarette industry and importer of such goods or their sellers shall not operate any type of gift program or such industry shall not provide any rebate to any other distributor even registered under VAT
- The liquor, Beer, or Cigarette industry and importer of such goods or their sellers shall not operate any type of gift program or such industry shall not provide any rebate to any other distributor even registered under VAT (4Nga VAT).
- Some rate is increased and some new item is introduced most noticeably excise @ 30/40/50/60/70/80% on the electric vehicle.
- There is no major amendment in custom law apart from the rate by finance act 2077/78. Like excise duty, customs duty is also increased on electric vehicles, and duty is increased on gold, petrol, diesel, etc
Flim Development Fee
As defined in the finance act 2077/78 following are the key points.
- 15% of the ticket amount is collected as a film Development fee from all foreign movies.
- In the case of cabin rate of 15% will increase to 20%
- Detail regarding Daily sales to be reported to the Film Development Board and inland revenue office (for Kathmandu valley) /inland revenue office (for other districts) if there is no inland revenue office then to be submitted to account administrative office on weekly basis.
- Mandatory E-ticket system to be linked with a central cinema management server before Poush 2077.
- The penalty will be imposed @100% for the first time and 200% for next time if the sales is made without following the e-ticketing system.
- The fee to be deposited before the 25th of next month.
- information regarding Serial number of tickets need to be used in next day to be submitted in advance
- For complete information refer to page 416 of the attached finance act.
Note: The Finance bill has to be passed by the Parliament to become Act which is Merely a Formality because of that we take the reference of Bill as Act.
This information is present for the quick and basic understanding of tax/Business related amendments only. Sincere efforts have been made to avoid mistake or error or omission; however, NEWSSANGALO does not assume any responsibility for errors or omissions, if any.