Income Tax Act, 2058 (2002)


Chapter-22 Fees and Interest



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Chapter-22

Fees and Interest

117. Fees to be charged in cases where documents are not maintained or return or income return is not submitted: (1) If any person does not do the followings, a fee in a sum to be set by One and a half percent per year of the assessable income drawn out without deducting any amount, if any, that can be deducted and by including any amount, if any, that has to be included in computing the income of any income year for each month and portion of the month or a sum set by One Thousand Rupees per month, whichever is higher, shall be imposed on such a person:-

(a) In cases where the income return of any income year has not been submitted pursuant to Sub-section (1) of Section 95, or

(b) In cases where the income return of any income year is not submitted pursuant to Sub-section (1) of Section 96.

(2) If any person does not maintain the documents required to be maintained in any income year pursuant to Section 81, a fee in a sum to be set by one and a half percent per year of the assessable income drawn out without deducting any amount, if any, that can be deducted and by including any amount, if any, that has to be included in computing the income of any income year for each month and portion of the month or a sum set by one Thousand Rupees per month, whichever is higher, shall be imposed on such a person.

(3) If any person withholding tax does not submit the return referred to in Sub-section (1) of Section 90, a fee in a sum to be set by one and a half percent per year of the amount of tax to be withheld for each month and portion of the month from the due date for submission of the return until the date on which such return is submitted shall be imposed on such a person.

118. Fees to be charged in cases where the person making payment in installments makes lesser payment of estimated tax: (1) In cases where the amount of installment tax paid by any person pursuant to clause (a) of this Sub-section is less than the amount of tax to be paid in installment pursuant to clause (b), interest shall be charged on such less amount pursuant to Sub-section (2):-

(a) The estimated or amended amount of tax computed by the person required to pay tax in installment pursuant to Section 95 in respect of the installment tax to be paid in any year pursuant to section 94,

(b) The amount of tax to be set by ninety percent of the amount of tax to be paid by the person referred to in clauses (a) and (b) of Section 3 in that year.

(2) A fee in a sum to be set by the normal rate of interest, for each month and portion of the month, from the due date for payment of the first installment in that year until the date on which the tax is assessed and becomes due and payable pursuant to Section 99 shall be imposed on the person referred to in Sub-section (1).

(3) In cases where the amount referred to in clause (a) is higher than the amount referred to in clause (b), interest shall be charged, pursuant to Sub-section (2), on such higher amount by the normal rate on the amount of each period.

(a) In cases where the estimate or revised estimate of the total amount to be paid by any person in installment for each installment period in any income year is accurate, Ninety percent of the amount,

(b) The amount of installments paid in that income year.

119. Interest to be charged in cases where tax is not paid: (1) In cases where any person does not pay tax on the prescribed due date for payment of tax, an interest by the normal rate of interest, for each month and portion of the month, in the amount due and payable shall be imposed on the person for the period during which tax is so due and payable.

(2) For purposes of computing the interest to be paid pursuant to Sub-section (1), interest shall not be exempted in the extended time-limit given pursuant to Section 98.

(3) The person withholding tax shall not be allowed to recover the interest payable by him because of his failure to observe Sub-section (4) of Section 90 from the person subject to tax withholding.

120. Fee to be charged on the person who submits false or misleading statement: In cases where any person submits to the Department a false or misleading statement on any matter or the information mentioned in the statement becomes misleading as result of concealing information of any matter or thing required to be submitted or removing such information from the statement, the following fee shall be imposed on such a person:-

(a) In cases where it has become false or misleading not by knowingly or recklessly but by mistake, Fifty percent of the less amount resulted therefrom.

(b) In cases where it has become false or misleading knowingly or recklessly, One Hundred percent of the less amount resulted therefrom.

Explanation: For purposes of this Section, "statement submitted to the Department" means any statement submitted in writing to the Department or to the officer authorized by the Department in the course of performing the duty pursuant to this Act and includes the statement submitted as follows:-

(a) Application, notice, description, complaint, deposition, or other document submitted, prepared, given or furnished pursuant to this Act,

(b) Document submitted to the Department or any officer of the department except under this Act,

(c) Reply to any question asked by the Department or any officer to any person, or

(d) Information given by any person who has reasonable knowledge of the matter to be informed to the Department or any officer through any other person.

121. Fee to be imposed on accomplice: A fee of cent percent amount of the tax less paid by an accomplice who knowingly or recklessly aids or abets or advises any offender referred to in Chapter-23 shall be charged on such accomplice.

122. Assessment of fee and interest: (1) The Department shall assess the fee and interest required to be paid by any person pursuant to this Chapter.

(2) In computing the liability for the fee and interest chargeable where any particular act has not been performed or chargeable in respect of any statement pursuant to this Chapter, it shall be computed separately in the case of each section of this Chapter.

(3) The fee and interest chargeable pursuant to this Section shall be added to any other tax, if any, payable pursuant to this Act; and mere payment of such fee and interest shall not be deemed as the release of any person from the liability related to criminal proceedings mentioned in Chapter-23.

(4) In cases where the fee and interest have been assessed pursuant to this Section, the Department shall give a written notice of the assessment, setting out the following matters, to that person. Such notice may be attached to and sent along with the notice to be issued pursuant to Section 102:

(a) The reasons why the Department has to assess the fee and interest,

(b) The amount for the fee and interest payable,

(c) The method how the amount has been computed,

(d) The time, place and mode for making a compliant against

the assessment.

(5) It shall be as follows in assessing the fee and interest pursuant to this Section:-

(a) The matters contained in Sub-section (1), Sub-section (2), clause (b) of Sub-section (3), Sub-section (4) and (5) of Section 101 shall also be applicable in assessing the fee and interest pursuant to this Section, and

(b) The matters contained in clauses (b) and (c) of Sub-section (3), Sub-sections (4) and (5) of Section 101 and Section 102 shall also be applicable in the case of Sub-section (4) of this Section.



Chapter-23

Offense and Punishment

123. Penalty to one who does not pay tax: A person who does not pay tax, without any reasonable ground, by the due date for payment of tax shall be punished with a fine of a sum from Five Thousand Rupees to Thirty Thousand Rupees or with imprisonment for a term from One month to Three months or with both penalties.

124. Penalty to one who submits false or misleading statement: In cases where any information or statement submitted by any person to the Department is false or misleading because of submission with intention or recklessness or that information becomes misleading since such person has not mentioned information of any particular matter or thing in the statement in respect of such subject, such person shall be punished with a fine of a sum from Forty Thousand Rupees to One Hundred Sixty Thousand Rupees or with imprisonment for a term from Six months to Two years or with both penalties.

Explanation: For purposes of this Section, "any information or statement submitted to the Department" means the statement/details mentioned in the explanation referred to in Section 120.

125. Penalty to one who obstructs or unduly influences tax administration: (1) A person who commits the following act shall be punished with a fine of a sum from Five Thousand Rupees to Twenty Thousand Rupees or with imprisonment for a term from one month to Three months or with both penalties:-

(a) To obstruct the officer of the Department in the course of carrying out his duty pursuant to this Act,

(b) Not to act as per the notice referred to in Section 83, or

(c) To obstruct in any other manner in the implementation of this Act.

(2) Any person who attempts to commit an act referred to in Sub-section (1) shall be punished with half a punishment mentioned in that Sub-section.

126. Penalty in the event of commission of offence by the person with or without authority: (1) Any authorized person who violates Section 84 shall be punished with a fine of a sum not exceeding eighty Thousand Rupees or with imprisonment for a term not exceeding one year or with both penalties.

(2) In cases where any person who is not authorized under this Act collects tax or any other amount in the name of tax or attempts to collect the same, such a person shall be punished with a fine of a sum from eighty Thousand Rupees to two hundred Thousand Rupees or with imprisonment for a term from one year to three years or with both penalties .

127. Penalty to accomplice: Any person who intentionally aids or abets or advises any other person to commit any offense under this Act shall be punished with half a punishment imposed on the offender.

Provided that, if such an accomplice is a governmental employee, he shall be liable to punishment equal to the punishment imposed on the offender.

128. Penalty to one who does not observe the Act: Except as otherwise provided for in this Act, any person who does not observe any provisions of this Act or the rules framed under this Act shall be punished with a fine of a sum from Five Thousand Rupees to Thirty Thousand Rupees.

129. Power of Department to pay amount of fine: (1) Notwithstanding anything contained elsewhere in this Chapter, in cases where any person admits in writing that he has committed any one or more offenses mentioned in this Chapter, except the offense mentioned in Section 126, before the commencement of the court proceedings, the Department may order such a person to pay the amount of fine not exceeding the amount of fine imposable for the commission of such one or more than one offense.

(2) In making the order referred to in Sub-section (1), the Department has to set out in such an order such offense, the amount of fine to be paid and the date for payment of the amount of fine.

(3) The order made by the Department pursuant to this Section shall be final and no appeal may be made against it.

130. To be state cases: The Government of Nepal shall be the plaintiff in the cases under this chapter.

131. Investigation and filing of cases: (1) The prescribed officer shall investigate the case on the offense punishable under this Chapter, and case shall be filed in the concerned District Court within thirty five days of the completion of such investigation.

(2) In conducting investigation pursuant to Sub-section (1), the investigating officer shall seek advice and opinion of the government attorney.

Chapter-24

Miscellaneous

132. Power to have expert's service: Government of Nepal may obtain the service of the concerned expert for the act related to tax auditing; and the provision on governmental secrecy mentioned in Section 84 shall also apply to such expert.

133. Departmental action to be taken: In cases where the liability of a taxpayer increases or decreases because of the assessment of tax made with recklessness, the Director General may institute departmental action to punish the concerned officer who has assessed such tax or has not assessed the revised tax within the time limit referred to in Sub-section (3) of Section 101.

134. Identity card of officer: Each officer has to hold the identity card as prescribed and show such identity card where any one requests him to show it.

135. Powers of court of law to be vested: For purposes of this Act, the Department shall have the powers vested in a court under the law in force in the matters of summoning the presence of the concerned person, recording of statements, examining evidence, and compelling production of documents.

136. Not to be responsible for an act done in good faith: Notwithstanding anything contained elsewhere in this Act, no officer shall be personally responsible for any act which he has done in good faith in carrying out his duties.

137. Power of Government of Nepal to give order or direction: Government of Nepal may give necessary order or direction to the Department in order to make tax administration effective.

138. Power to frame Rules: Government of Nepal may frame necessary rules in order to carry out the objects of this Act.

139. Power to make and enforce manuals: The Department may make and enforce necessary manuals, subject to this Act and the rules framed under this Act.

140. Alteration in Schedules: Government of Nepal may, by a Notification in the Nepal Gazette, may make necessary alterations in the Schedules other than Schedule-1.

141. Police to render assistance: It shall be the duty of the Police to render the assistance sought by the Department on the implementation of this Act and the rules framed under this Act.

142. This Act to prevail on tax provision: Notwithstanding anything contained in the law in force, except in cases where the Financial Act to be enforced in every year amends this Act and provides for the imposition, assessment, increase, decrease, exemption, or remission of tax, no other Act shall make other provisions on amendments to, alteration in, the tax provisions referred to in this Act or other tax related provisions.

143. Repeal, amendment and saving: (1) The Income Tax Act, 2031 (1974) and the House and Land Rent Tax Act, 2023 (1966) are hereby repealed.

(2) The following Acts are hereby amended as follows:-

(a) Section 15 of the National Loans Act, 2017 (1960) is hereby repealed.

(b) Amendment to the Employee Provident Fund Act, 2019 (1962): The words "no tax of any kind except income tax shall be levied" shall be substituted for the words "no tax of any kind shall be levied" contained at the end of clause (b) of Section 18 of the Employee Provident Fund Act 2019 (1962).

(c) Amendment to the Nepal Petroleum Act, 2040 (1984): Clause (c) of Section 13 of the Nepal Petroleum Act, 2040 (1984) is hereby deleted.

(d) Amendment to Section 29 of the Retirement Fund Act, 2042 (1986): The words "no tax of any kind except income tax shall be levied" shall be substituted for the words "no tax of similar other kind shall be levied" contained in Section 29 of the Retirement Fund Act, 2042 (1986).

(e) Amendment to Section 51 of the Citizen Investment Fund Act, 2047 (1991): Section 51 of the Citizen Investment Fund Act, 2047 (1991) is hereby repealed.

(f) Amendment to Section 30 of the Nepal Academy for Science and Technology Act, 2048 (1991): Section 30 of the Royal Nepal Academy for Science and Technology Act, 2048 (1991) is hereby repealed.

(g) Amendment to Section 15 of the Industrial Enterprises Act, 2049 (1992):

(1) Clauses (c), (d), (e), (j), (l), (p), (q), (r), (s), (t) of Section 15 of the Industrial Enterprises Act, 2049 (1992) are hereby deleted.

(2) The words " respectively Thirty, Twenty-Five and Twenty percent on the income tax until ten years of the date of operation and" are hereby deleted.

(h) Amendment to the Foreign Investment and Technology Transfer Act, 2049 (1992): Sub-section (1a.) of Section 5 of the Foreign Investment and Technology Transfer Act, 2049 (1992) is hereby deleted.

(i) Amendment to the B. P. Koirala Health Science Institute Act, 2049 (1992): The word "income-tax" contained in the second line of Section 21 of the B. P. Koirala Health Science Institute Act, 2049 (1992) is hereby deleted.

(j) Amendment to the Tribhuvan University Act, 2049 (1992): Sub-section (2) of Section 33 of the Tribhuvan University Act, 2049 (1992) is hereby deleted.

(k) Amendment to the Electricity Act, 2049 (1992):

(1) The word "income-tax" contained in the heading of Section 12 of the Electricity Act, 2049 (1992) is hereby deleted.

(2) Sub-sections (1), (2), (3), (4), (5) and (6) are hereby deleted.

(l) Amendment to the Pokhara University Act, 2053 (1996): Sub-section (2) of Section 36 of the Pokhara University Act, 2053(1996) is hereby deleted.

(m) Amendment to Section 18 of the B. P. Koirala Memorial Cancer Hospital Act, 2053 (1996): The word "income-tax" contained in Sub-section (1) of Section 18 of the B. P. Koirala Memorial Cancer Hospital Act, 2053 (1996) is hereby deleted.

(n) Amendment to the Town Development Fund Act, 2053 (1996): Section 24 of the Town Development Fund Act, 2053 (1996) is hereby repealed.

(o) Sub-section (1) of Section 34 of the Telecommunications Act, 2053(1996) is hereby repealed.

(3) All acts and actions done or taken under the Acts or Sections of the Acts repealed or amended pursuant to Sub-section (1) or (2) shall be deemed to have been done or taken under this Act.

(4) The provisions of the Income Tax Act, 2031(1974) shall apply to the provisions relating to the assessment and collection of income tax for the income year prior to the commencement of this Act.

Schedule-1

(Relating to Section 4)



Rates of Tax

1. In the case of natural person: (1) Tax shall be levied by the following rate on the taxable income of any resident natural person in any income year, subject to Sub-sections (2) and (4) of this Schedule:-

(a) No tax shall be levied on the taxable income not exceeding Fifty -five Thousand Rupees,

(b) Where the taxable income is more than Fifty-five Thousand Rupees but less than One Hundred thirty Thousand Rupees, Fifteen percent on the taxable income of more than Fifty-five Thousand Rupees, and

(c) Where the taxable income is more than One Hundred thirty Thousand Rupees, Rs.11, 250.00 on the taxable income up to One Hundred Thirty Thousand Rupees and Twenty-Five percent on the taxable income exceeding One Hundred Thirty Thousand Rupees.

(2) Tax shall be levied by the following rates on the taxable income of any spouse making a choice pursuant to Section 50 in any income year, subject to Sub-sections (4) of this Schedule:-

(a) No tax shall be levied on the taxable income not exceeding Seventy-Five Thousand Rupees,

(b) Where the taxable income is more than Seventy-Five Thousand Rupees but less than One Hundred Fifty Thousand Rupees, Fifteen percent on the taxable income exceeding Seventy-Five Thousand Rupees, and

(c) Where the taxable income is more than One Hundred Fifty Thousand Rupees, Rs.11,250.00 on the taxable income up to One Hundred Fifty Thousand Rupees and twenty-five percent on the taxable income exceeding One Hundred Fifty Thousand Rupees.

(3) The provision contained in Sub-section (4) of this Schedule shall apply in the following circumstances:-

(a) In the case of a resident natural person, where the income is more than Fifty-five Thousand Rupees in any income year or in the case of a resident spouse who has not made a choice referred to in Section 50, , where the income is more than Seventy-Five Thousand Rupees in any income year, and

(b) Where the net profit derived from the disposal of non-business taxable property is included in the computation of the income and corresponding taxable income of that natural person or spouse.

(4) Tax shall be levied by the following rate on the following person, subject to Sub-section (3) of this Schedule:-

(a) Tax shall be levied by the rate referred to in Sub-section (1) or (2) of this Schedule on the amount whichever is higher out of the following amounts, as if only it were the taxable income of that natural person or spouse:

(1) The amount remaining balance after subtracting the amount of profit from the total taxable income of that natural person or spouse, or

(2) Fifty-five Thousand Rupees, in the case of a natural person, or Seventy-Five Thousand Rupees, in the case of a spouse.

(b) Tax shall be levied by ten percent on the remaining amount of the taxable income.

Provided that, tax shall be deducted only by six percent on the provident fund or gratuity paid from an approved retirement fund.

(5) For the natural persons residing in the remote areas specified by Government of Nepal, a maximum sum of thirty Thousand Rupees may, for the remote allowance, be added, as prescribed, to the threshold of non-taxable amount of Fifty -five Thousand Rupees and Seventy-Five Thousand Rupees mentioned in Sub-sections (1), (2), (3) and (4) of this Schedule.

(6) The threshold as referred to in Sub-section (4) of Section 4 of this Act shall be an income of One Hundred Thousand Rupees and a turnover equivalent to one million rupees.

(7) The amount of tax pursuant to Sub-section (4) of Section 4 of this Act shall be as follows:-

(a) In the case of a natural person carrying on a business in the municipal corporation or sub-municipal corporation area, two Thousand Rupees,

(b) In the case of a natural person carrying on a business in the municipal area, one thousand five hundred rupees,

(c) In the case of a natural person carrying on a business in any other place, one Thousand Rupees.

(8) Tax shall be levied by twenty-five percent on the taxable income of a non-resident natural person in any income year.

(9) Notwithstanding anything contained elsewhere in this Section, in cases where any resident natural person has a pension income, tax shall be computed pursuant to this Section only on the amount remaining balance after subtracting an additional twenty-five percent of the amount mentioned in clause (a) of Sub-section (1) for the natural person or in clause (a) of Sub-section (2) for the spouse from the taxable income.

2. In the case of entity: (1) Tax shall be levied by twenty-five percent on the taxable income of any entity in any income year, subject to Sub-sections (2), (3), (4), (5) and (7) of this Section.

(2) Tax shall be levied by thirty percent on the taxable income of any bank, financial institution, an entity carrying on general insurance business or petroleum works pursuant to the Nepal Petroleum Act, 2040(1983), in any income year.


Explanation: "Taxable income", in the case of petroleum works, means the taxable income assessed in accordance with the procedures mentioned in the petroleum agreement and this Act and the Rules framed under this Act.

(3) Tax shall be levied by twenty percent on the taxable income of any entity earned in any income year as follows from the source in Nepal:

(a) In cases where the entity is fully involved throughout any year in the operation of a special industry mentioned in Section 11 of this Act,

(b) In cases where the entity,-

(1) Builds and operates any road, bridge, tunnel, ropeway or sky-bridge, or

(2) Operates any trolley bus or tram.

(4) In cases where, in any income year, any entity carries on projects such as to build, operate any public infrastructure project and transfer it to Government of Nepal and building power-house, generation and transmission of electricity, tax shall be levied by twenty percent on the taxable income of that entity.

(5) In the case of the money of any deceased resident person or the taxable income of the trust of a disabled resident person, tax shall be levied on such money or taxable income pursuant to Sub-sections (1) and (4) of Section 1 of this Schedule as if the money or trust resident were a natural person.

(6) Tax shall be levied by ten percent on the income sent abroad by any non-resident person's foreign permanent establishment situated in Nepal in any income year.

(7) Tax shall be levied by five percent on the taxable income of any non-resident person in respect of the income mentioned in Section 70 in any income year.


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