Table of Contents
Income tax return filing is a legal obligation for every taxpayer in Nepal — individuals with taxable income, businesses, partnerships, and entities registered with the Inland Revenue Department (IRD). Whether you earn a salary, run a business, or receive rental income, you must file an annual income tax return within the deadline set by the Income Tax Act 2058 (2002). This guide covers the complete step-by-step process for filing income tax returns in Nepal for Fiscal Year 2082/83 (2025/26), including who must file, which forms to use, how to file online, required documents, deadlines, and penalties.
Income tax return filing in Nepal is mandatory for all PAN-registered individuals and entities. File online at ird.gov.np or offline at your registered Inland Revenue Office (IRO). Deadline: Ashoj end (mid-October) for the preceding fiscal year. Key forms: D01 (individuals), D02 (businesses/entities). Late filing penalty: NPR 100/day (individuals), NPR 500/day (entities) plus interest at 15% per annum on unpaid tax. Required: PAN card, income statements, TDS certificates, expense receipts, and bank statements.
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What Is an Income Tax Return in Nepal?
An income tax return is a formal declaration submitted to the Inland Revenue Department (IRD) showing your total income, deductions, and tax liability for a fiscal year. It is governed by the Income Tax Act 2058 (2002) and the Income Tax Rules 2059 (2002). Filing a return is separate from paying tax — even if your employer deducts TDS from your salary, you may still need to file a return.
| Detail | Information |
|---|---|
| Governing law | Income Tax Act 2058 (2002), Section 95-99 |
| Filing authority | Inland Revenue Department (IRD), Ministry of Finance |
| Fiscal year | Shrawan 1 to Ashad end (mid-July to mid-July) — FY 2082/83 |
| Filing deadline | Within 3 months after fiscal year end (Ashoj end / mid-October) |
| Online portal | ird.gov.np |
| Key forms | D01 (individuals), D02 (entities/businesses) |
| Filing fee | No fee for filing the return itself |
Who Must File an Income Tax Return in Nepal?
Not everyone needs to file a return. The Income Tax Act 2058 specifies who is required to file and who is exempt.
Mandatory Filing
| Category | Filing Required? | Notes |
|---|---|---|
| Salaried individuals with income above threshold | Yes | If taxable income exceeds the basic exemption (NPR 5 lakh single / NPR 6 lakh married) |
| Self-employed individuals | Yes | All self-employed persons with PAN |
| Sole proprietorship firms | Yes | Must file D02 form |
| Partnerships | Yes | Partnership itself files; partners report their share |
| Companies (Pvt. Ltd., Public) | Yes | Must file D02 with audited financial statements |
| NGOs and non-profits | Yes | Exempt from tax but must file a return |
| Anyone with rental income | Yes | Regardless of amount |
| Anyone with capital gains | Yes | Sale of land, shares, or other assets |
| Foreign nationals with Nepal-source income | Yes | Must file before departing Nepal |
Not Required to File
- Salaried employees whose only income is salary and TDS has been fully deducted by the employer — they may opt out of filing (but filing is still recommended for refund claims)
- Individuals with income below the basic exemption threshold and no PAN registration
- Diplomatic missions and staff with diplomatic immunity
Income Tax Return Forms in Nepal
The IRD prescribes specific forms depending on your taxpayer category. Using the wrong form will result in rejection.
| Form | Who Uses It | Key Details |
|---|---|---|
| D01 (Remuneration Income Return) | Salaried individuals | Income from employment only; simpler form |
| D02 (Business/Investment Return) | Businesses, self-employed, companies, partnerships | Income from business, investment, or multiple sources |
| Advance Tax Return | Taxpayers making advance (installment) payments | Filed quarterly during the fiscal year |
| Estimated Return | All taxpayers (first installment estimate) | Filed at start of fiscal year estimating annual liability |
| Amended Return | Taxpayers correcting errors | Filed within 4 years of original return under Section 98 |
Documents Required for Income Tax Return Filing
Gather all documents before starting your return. Missing documents can delay processing or trigger an assessment notice.
For Salaried Individuals (D01)
| Document | Purpose |
|---|---|
| PAN card | Taxpayer identification — get PAN card |
| Salary certificate from employer | Shows gross salary, allowances, deductions |
| TDS certificate (Annex 5) | Proof of tax deducted at source — learn about TDS |
| Bank statements | Interest income, other credits |
| CIT/SSF contribution proof | Eligible for deduction (up to NPR 3 lakh) |
| Life insurance premium receipts | Deductible up to NPR 40,000 |
| Medical insurance premium receipts | Deductible up to NPR 20,000 |
| Donation receipts | Donations to approved organizations (max 5% of taxable income) |
For Businesses and Entities (D02)
| Document | Purpose |
|---|---|
| PAN/VAT registration certificate | Business identification |
| Audited financial statements | Required for companies; recommended for firms |
| Profit & loss account | Shows business income and expenses |
| Balance sheet | Assets, liabilities, equity position |
| TDS certificates received | Tax credits for TDS deducted by clients |
| TDS deposit vouchers | Proof of TDS deposited on employee salaries, rent, etc. |
| VAT returns (monthly) | If VAT-registered |
| Depreciation schedule | Asset depreciation calculation as per Schedule 2 |
| Bank statements | All business accounts for the fiscal year |
| Advance tax payment receipts | Quarterly installment payments |
Step-by-Step: Filing Income Tax Return Online in Nepal
The IRD encourages electronic filing through its portal. Here is the complete process for filing your return online at ird.gov.np.
Step 1: Log In to IRD Portal
- Go to ird.gov.np
- Click "Taxpayer Portal" or "e-Filing"
- Enter your PAN number and password
- If you do not have an account, register first using your PAN — see our online PAN registration guide
Step 2: Select the Correct Form
- Navigate to "Income Tax" → "Return Filing"
- Select the fiscal year (2082/83)
- Choose D01 (remuneration income) or D02 (business/investment income)
Step 3: Fill in Income Details
- D01 filers: Enter gross salary, allowances, CIT/SSF contributions, insurance premiums, and other deductions
- D02 filers: Enter business income, cost of goods sold, expenses, depreciation, and investment income
- Report all sources: salary, business, rental, investment, capital gains, foreign income
Step 4: Claim Deductions and Credits
- Social Security Fund (SSF) contributions
- Citizen Investment Trust (CIT) deposits — up to NPR 3,00,000
- Life insurance premiums — up to NPR 40,000
- Medical insurance — up to NPR 20,000
- Donations to approved organizations — up to 5% of adjusted taxable income
- TDS already deducted (enter from TDS certificates)
- Advance tax paid during the year
Step 5: Calculate Tax Liability
The system auto-calculates your tax based on the current income tax slabs. Verify the calculation against these rates for individuals (FY 2082/83):
| Taxable Income (NPR) | Rate |
|---|---|
| First 5,00,000 (single) / 6,00,000 (married) | 1% (Social Security Tax) |
| Next 2,00,000 | 10% |
| Next 3,00,000 | 20% |
| Next 10,00,000 | 30% |
| Next 30,00,000 | 36% |
| Above 50,00,000 (single) / 51,00,000 (married) | 39% |
Step 6: Upload Documents and Submit
- Attach required documents (audited report for D02, TDS certificates)
- Review all entries carefully
- Click "Submit Return"
- Save or print the acknowledgment receipt — this is your proof of filing
Step 7: Pay Any Balance Tax Due
- If tax payable exceeds TDS and advance tax paid, pay the balance
- Payment options: bank deposit, online banking, or at IRO counter
- Use the correct revenue code and deposit to the designated bank
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Filing Income Tax Return Offline
If online filing is not possible, you can file a physical return at your registered Inland Revenue Office.
| Step | Action | Details |
|---|---|---|
| 1 | Get the correct form | Download from ird.gov.np or collect from IRO |
| 2 | Fill out the form manually | Use blue or black ink pen, no corrections without initials |
| 3 | Attach all documents | Financial statements, TDS certificates, receipts |
| 4 | Submit at IRO | Submit at your registered Inland Revenue Office |
| 5 | Get acknowledgment | Ensure you receive a stamped acknowledgment receipt |
| 6 | Pay balance tax | Deposit at designated bank with revenue code |
Income Tax Return Filing Deadlines
Missing the deadline triggers automatic penalties. The law provides strict timelines under Section 95 and 96 of the Income Tax Act 2058.
| Type | Deadline | Details |
|---|---|---|
| Annual return (D01/D02) | Ashoj end (mid-October) | 3 months after fiscal year end |
| Estimated return | Poush end (mid-January) | Within 6 months of fiscal year start |
| Advance tax — 1st installment | Poush end (mid-January) | 40% of estimated annual tax |
| Advance tax — 2nd installment | Chaitra end (mid-April) | 70% cumulative |
| Advance tax — 3rd installment | Ashad end (mid-July) | 100% of estimated tax |
| Amended return | Within 4 years | Section 98 — correct errors in original return |
| Foreign nationals departing | Before departure | Must file and get tax clearance certificate |
Penalties for Late Filing and Non-Filing
The Income Tax Act imposes both penalties and interest for non-compliance. These apply automatically — you do not receive a grace period.
| Violation | Penalty | Legal Reference |
|---|---|---|
| Late filing — individual | NPR 100 per day of delay | Section 117(1) |
| Late filing — entity | NPR 500 per day of delay | Section 117(1) |
| Non-filing | Assessed by IRD based on best judgment (Section 100) | Section 100, 117 |
| Interest on unpaid tax | 15% per annum on outstanding amount | Section 119 |
| Understating income | 50% of understated tax amount | Section 120 |
| Fraudulent return | 100% of tax evaded + criminal prosecution | Section 120, 123 |
| Failure to maintain records | NPR 5,000 to NPR 25,000 | Section 117(3) |
Example: If a company files its return 60 days late, the penalty is NPR 500 × 60 = NPR 30,000 — plus 15% annual interest on any unpaid tax.
Deductions and Exemptions Available
Nepal's Income Tax Act allows specific deductions that reduce your taxable income. Claiming these correctly can significantly lower your tax burden.
| Deduction | Maximum Limit | Applicable To |
|---|---|---|
| Social Security Fund (SSF) | Employee: 11% + Employer: 20% of basic salary | All employees covered under SSF |
| CIT contribution | Up to NPR 3,00,000 | Individual taxpayers |
| Life insurance premium | Up to NPR 40,000 | Individual taxpayers |
| Medical insurance | Up to NPR 20,000 | Individual taxpayers |
| Donation to approved institutions | Up to 5% of adjusted taxable income | All taxpayers |
| Remote area allowance | Up to NPR 50,000 | Government employees in remote areas |
| Disability exemption | 50% additional threshold | Persons with disability |
| Retirement fund (approved) | Contribution amount | Contributions to approved retirement funds |
Advance Tax Payment System
Taxpayers whose estimated annual tax exceeds NPR 5,000 must pay advance tax in three installments during the fiscal year under Section 93 and 94 of the Income Tax Act 2058.
| Installment | Due Date | Cumulative Percentage | Amount |
|---|---|---|---|
| 1st installment | Poush end (mid-January) | 40% | 40% of estimated annual tax |
| 2nd installment | Chaitra end (mid-April) | 70% | 30% additional (70% cumulative) |
| 3rd installment | Ashad end (mid-July) | 100% | 30% additional (100% cumulative) |
If actual tax liability differs from the estimate, you must adjust in the final return. Underpayment of advance tax attracts 15% annual interest on the shortfall.
Income Tax Return for Different Categories
Salaried Employees
Most salaried employees in Nepal have tax deducted at source (TDS) by their employer under Section 87. However, filing a return is beneficial if you:
- Have income from multiple employers
- Earn rental income, interest, or capital gains alongside salary
- Want to claim deductions for insurance, CIT, or SSF not fully accounted for in TDS
- Need a tax clearance certificate
Freelancers and Self-Employed
Freelancers, consultants, and self-employed professionals must:
- Maintain books of accounts
- File D02 form with profit & loss account
- Pay advance tax in three installments
- Deduct eligible business expenses from gross income
Companies and Entities
All registered companies must file D02 with audited financial statements. Requirements include:
- Audit report from a registered auditor
- Complete financial statements (profit & loss, balance sheet, cash flow)
- Tax computation showing book profit to taxable income adjustments
- TDS compliance certificates
- Company registration certificate copy
Foreign Nationals Working in Nepal
Foreign nationals earning income in Nepal are taxable on their Nepal-source income. They must:
- Obtain a PAN from IRD
- File annual return before the deadline or before departing Nepal
- Obtain a tax clearance certificate before leaving the country (mandatory under Section 104)
- Tax rates for non-residents: flat 25% on all Nepal-source income
Amended Return (Correcting Errors)
If you discover an error in your filed return, you can file an amended return under Section 98 of the Income Tax Act 2058.
| Detail | Rule |
|---|---|
| Time limit | Within 4 years from the original filing date |
| Conditions | Must have reasonable grounds for the error |
| Additional tax | Must pay any additional tax due with interest |
| Refund | If amended return shows overpayment, IRD will process refund |
| Penalty | No penalty if genuine error; 50% penalty if understatement is deliberate |
Tax Refund Process in Nepal
If your TDS and advance tax payments exceed your actual tax liability, you are entitled to a tax refund under Section 104A.
- Claim in return: Show the excess payment in your annual return
- Processing time: IRD should process refunds within 60 days of filing
- Carry forward: If not refunded, the amount is carried forward as credit to next year
- Interest on delayed refund: IRD pays 15% annual interest if refund is delayed beyond 60 days
Common Mistakes to Avoid
| Mistake | Consequence | How to Avoid |
|---|---|---|
| Using wrong form (D01 vs D02) | Return rejected by system | D01 for salary only; D02 for business/mixed income |
| Not reporting all income sources | 50% understatement penalty | Include rental, interest, capital gains, foreign income |
| Missing TDS credit claims | Paying more tax than required | Collect all TDS certificates from deductors |
| Filing after deadline | NPR 100/day (individual) or NPR 500/day (entity) | Set calendar reminders for Ashoj end |
| Not maintaining records | NPR 5,000–25,000 penalty | Keep books for at least 5 years |
| Incorrect PAN on return | Return not processed | Double-check PAN before submitting |
| Not paying advance tax | 15% interest on shortfall | Pay installments on time |
| Claiming non-eligible expenses | Disallowance + penalty | Follow Schedule 2 for depreciation, Section 21 for expenses |
Record-Keeping Requirements
Under Section 81 of the Income Tax Act, every taxpayer must maintain records for a minimum period. Failure to do so can result in penalties and best-judgment assessments.
- Minimum retention: 5 years from the end of the income year
- Records include: Books of accounts, invoices, receipts, bank statements, contracts, TDS certificates
- Digital records: Acceptable if they can be produced on demand
- Audit assessment cases: Keep records until the assessment is finalised
Online vs Offline Filing Comparison
| Feature | Online (ird.gov.np) | Offline (IRO Visit) |
|---|---|---|
| Availability | 24/7 during filing season | Office hours only (10am–5pm Sun–Fri) |
| Processing speed | Instant acknowledgment | May take 1–3 days for acknowledgment |
| Auto-calculation | Yes — system calculates tax | Manual calculation required |
| Error checking | System validates before submission | Manual review by IRO staff |
| Payment | Online banking or bank deposit | Bank deposit only |
| Records | Digital copy maintained by IRD | Must keep physical copy yourself |
| Convenience | File from anywhere | Must visit registered IRO physically |
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Tax Assessment by IRD
After you file your return, the IRD may conduct an assessment under the following circumstances:
- Self-assessment (Section 99): Your filed return is treated as self-assessment unless IRD initiates review
- Amended assessment (Section 100): IRD can amend your assessment within 4 years if there is reason to believe income was understated
- Best judgment assessment (Section 100): If you fail to file, IRD assesses your tax based on available information
- Jeopardy assessment (Section 101): If IRD believes collection is at risk, it can issue immediate assessment
You have the right to appeal any assessment to the Revenue Tribunal within 35 days of receiving the assessment order.
Key Sections of the Income Tax Act 2058 for Return Filing
| Section | Subject | Key Provision |
|---|---|---|
| Section 4-8 | Income heads | Employment, business, investment income categories |
| Section 11-12 | Exemptions | Basic exemption thresholds for individuals |
| Section 21 | General deductions | Expenses incurred in earning income |
| Section 63 | Tax rates | Schedule 1 — individual and entity tax rates |
| Section 81 | Record keeping | 5-year retention requirement |
| Section 87-92 | TDS provisions | Withholding requirements for various payments |
| Section 93-94 | Advance tax | Installment payment obligations |
| Section 95 | Return of income | Filing obligation and timeline |
| Section 98 | Amended return | Correction within 4 years |
| Section 100 | Assessment | IRD assessment and best judgment |
| Section 117-123 | Penalties | Late filing, understatement, fraud penalties |
Frequently Asked Questions
All PAN-registered individuals with taxable income above the basic exemption (NPR 5 lakh single / NPR 6 lakh married), self-employed persons, businesses, companies, partnerships, NGOs, and anyone with rental income or capital gains must file. Salaried employees with only employer income and full TDS deduction may be exempt but filing is recommended.
The annual income tax return must be filed by Ashoj end (mid-October) — within 3 months after the fiscal year ends. The fiscal year in Nepal runs from Shrawan 1 to Ashad end (mid-July to mid-July).
Late filing penalty is NPR 100 per day for individuals and NPR 500 per day for entities. Additionally, 15% annual interest applies on any unpaid tax amount. Non-filing may result in best-judgment assessment by IRD.
D01 is for salaried individuals with remuneration income only. D02 is for businesses, self-employed persons, companies, partnerships, and taxpayers with income from business or investment. Use D01 if salary is your only income; D02 for everything else.
Log in to ird.gov.np taxpayer portal with your PAN and password. Select "Income Tax → Return Filing," choose the fiscal year and correct form (D01 or D02), fill in income and deduction details, upload documents, review, and submit. Save the acknowledgment receipt as proof.
Required documents include PAN card, salary certificate or profit & loss account, TDS certificates, bank statements, CIT/SSF contribution proof, insurance premium receipts, and donation receipts. Businesses also need audited financial statements, VAT returns, and depreciation schedules.
Yes. Under Section 98 of the Income Tax Act 2058, you can file an amended return within 4 years of the original filing date if you discover genuine errors. Any additional tax must be paid with interest. No penalty applies for genuine corrections.
Deductions include Social Security Fund (SSF) contributions, CIT deposits (up to NPR 3 lakh), life insurance premiums (up to NPR 40,000), medical insurance (up to NPR 20,000), donations to approved institutions (up to 5% of taxable income), and remote area allowance for government employees.
Individual rates: first NPR 5 lakh (single) / 6 lakh (married) at 1% SST, next 2 lakh at 10%, next 3 lakh at 20%, next 10 lakh at 30%, next 30 lakh at 36%, and above NPR 50/51 lakh at 39%. Company rate is 25% (standard).
If TDS and advance tax paid exceed actual liability, claim the refund in your annual return. IRD should process refunds within 60 days. If delayed, IRD pays 15% annual interest. Alternatively, excess can be carried forward as credit to the next fiscal year.
If salary is your only income and your employer has deducted full TDS, filing is not strictly mandatory. However, filing is recommended if you have other income (rental, interest), want to claim additional deductions, or need a tax clearance certificate.
Advance tax is paid in three installments during the fiscal year when estimated annual tax exceeds NPR 5,000. Schedule: 40% by Poush end, 70% by Chaitra end, 100% by Ashad end. Underpayment attracts 15% annual interest on the shortfall.
Yes. Foreign nationals earning Nepal-source income must file an income tax return. Non-residents are taxed at a flat 25% rate. They must also obtain a tax clearance certificate before departing Nepal under Section 104 of the Income Tax Act.
Under Section 81, all taxpayers must retain records for a minimum of 5 years from the end of the income year. Records include books of accounts, invoices, receipts, bank statements, TDS certificates, and contracts. Digital records are accepted.
Non-filing results in best-judgment assessment by IRD under Section 100 — the IRD estimates your income and issues a tax demand. You also face daily late-filing penalties, 15% interest on unpaid tax, and potential prosecution for tax evasion under Section 123.
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