Income Tax Act, 2058 (2002)


Special Provisions on Banking and Insurance Business



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Special Provisions on Banking and Insurance Business

59. Banking business: (1) In computing the income or loss made by any person carrying on a banking business from that business in any income year, it shall be separately computed as if the banking business were a business distinct from any other business carried on by that person.

(2) If any person suffers a loss from the banking business in any income year, that person may subtract, as prescribed, such loss from the incomes of the past five income years from that business.

(3) In subtracting the loss pursuant to Sub-section (2), the following provisions shall apply:-

(a) It shall not exceed any income earned from that business in the past income year,

(b) It shall not exceed the total sum of loss,

(c) The amount of loss that could not be deducted for purposes of Section 20 shall be lessened.


Explanation: For purposes of this Section, "banking business" means banking transactions carried out by banks and financial institutions permitted to carry out banking transactions under the laws in force.

60. General insurance business: (1) In computing the income or loss made by any person carrying on a general insurance business from that business in any income year, it shall be separately computed as if the insurance business were a business distinct from any other business carried on by that person.

(2) While computing the income of any person carrying on the insurance business in any income year, it shall be done as follows:-

(a) In income, in addition to any other amounts required to be included, the following amounts, as well, have to be included:-

(1) Amounts for premium of insurance including premium for reinsurance received by that person from that business in that year, and

(2) Amounts received in that year from payments referred to in sub-clause (1) of clause (b) for any contract of reinsurance, security, guarantee or compensation.

(b) In expenses, in addition to the amounts that can be deducted, the following amounts, as well, may be deducted:-

(1) The payments made by that person as an insurer in operating that business in that year, and

(2) The premiums included pursuant to sub-clause (1) of clause (a) in computing the income earned from that business in that year or last year and returned to the insured in that year.

(3) If any person suffers loss from the registered general insurance business in any income year, that person may subtract such loss, as prescribed, from the incomes of that business earned in last five income years.

(4) In subtracting the loss pursuant to Sub-section (3), the following provisions shall apply:-

(a) It shall not exceed any income earned from that business in the past income year,

(b) It shall not exceed the total sum of loss,

(c) The amount of loss that could not be deducted for purposes of Section 20 shall be lessened.



Explanation: For purposes of this Section, "registered general insurance business" means an insurance business registered in Nepal pursuant to the law in force and carrying on general business transactions.

61. Investment insurance business: (1) In computing the income or loss made by any person carrying on an investment insurance business from that business in any income year, it shall be separately computed as if the investment insurance business were a business distinct from any other business carried on by that person.

(2) It shall be as follows In computing the income of any person carrying on the investment insurance business in any income year, it shall be as follows:-

(a) Except the following amounts, other amounts that can be included pursuant to this Act have to be included:

(1) Amounts reinsurance for premium of insurance including premium received by that person in operating that business in that income year, and

(2) Amounts received in that year from payments referred to in sub-clause (1) of clause (b) for any contract of reinsurance, security, guarantee or compensation.

(b) Except the following amounts, other amounts that can be deducted pursuant to this Act have to be deducted:

(1) The payments made by any person as an insurer in operating that business, and

(2) The premiums returned to the insured referred to in sub-clause (1) of clause (a).

(3) The amounts referred to in sub-clauses (1) and (2) of clause (a) of Sub-section (2) and sub-clauses (1) and (2) of clause (b) have to be included in the incomes and expenses for the property or liability of that person.

(4) The investment insurance agreement of investment insurance business of any person shall not be deemed as the property and liability of that person.

62. Amount received from insurance: (1) For purposes of computing the income of any person, the provisions contained in section shall apply in respect of the amount received by that person from insurance.

(2) Notwithstanding anything contained in Sub-section (1), the following provisions shall apply in respect of the profits made from investment insurance:-

(a) In cases where a resident person makes payment of such amount, tax shall be imposed on the insured through final tax deduction, and

(b) In cases where a non-resident person makes payment of such amount, it shall be computed by including that amount in the income of the insured.

Explanation: For purposes of this Section, "profits made from investment insurance" means the excess sums of payment received by any person for investment insurance in respect of that insurance over the premiums paid by that person.

Chapter-12

Special Provisions on Retirement Saving

63. Approval of retirement fund: (1) If a resident person who desires to hold a retirement fund make an application to the Department for having the retirement fund, the Department shall give approval as prescribed.

(2) A natural person who is a beneficiary of the retirement fund may make a claim to have the retirement contribution made to the fund in any income year deducted from his taxable income.

(3) Notwithstanding anything contained in Sub-section (2), the amount claimed by any person for deduction in any income year pursuant to that Sub-section shall not exceed the prescribed limit of retirement contribution.

64. Tax in retirement fund: (1) For purposes of assessing the income of the retirement fund, the amounts to be included or deducted pursuant to this Act shall be included or deducted in computing the income.

Provided that, ,-

(a) Contributions made to the fund shall not be the income of the fund and such contributions shall not be included in computation.

(b) Retirement payments shall not be the expenses of the fund and such payments shall not be deducted in computing the income.

(c) Interest of any beneficiary in the retirement fund shall not be a liability of the fund.

(2) No tax shall be levied in the income of the retirement fund.

(3) If any retirement fund ceases to remain in a form of such fund, such fund has to pay tax in a sum to be set, by the rate of tax applicable to companies, by subtracting the amount referred to in clause (b) from the amount referred to in clause (a).

(a) All retirement contributions paid to the fund between the period from the date when the fund got approval as a retirement fund and the date when the recognition ceased to exist and all income amounts treated as taxable incomes in cases where Sub-section (2) is not applicable,

(b) All retirement payments made by the fund between the period from the date when the fund got approval as a retirement fund and the date when the recognition ceased to exist.

65. Retirement payments: (1) For purposes of computing the income earned by any natural person from the interest in any approved retirement fund, the following provisions shall apply:-

(a) Retirement payments made by the fund for the interest in the fund have to be included in the income, and

(b) Notwithstanding anything contained in clause (a), in cases where such payment is made in lump sum, the payment to be set by subtracting Fifty percent of the paid amount or five hundred Thousand Rupees, whichever is higher, from the amount so paid shall be deemed as the profit made by the person from the disposal of his non-business taxable property.

(2) For purposes of computing the profit made by any natural person from the interest in any retirement fund that has not obtained approval, the following provisions shall apply:-

(a) Where a resident person has made payment, tax shall be imposed on the beneficiary in that amount as withholding of tax finally, and

(b) Where a non-resident person has made payment, that amount has to be included in computing the income of the beneficiary.


Explanation: For purposes of this Section, "profit made from the interest in any retirement fund that has not obtained approval' means, in cases where retirement payments made from a retirement fund which has not obtained approval to a beneficiary natural person for his interest in the fund exceed the amounts of retirement contributions paid by that person to that fund for his interest in the fund, the amount to the extent of such excess.

66. Expenses and incomes for interest in retirement fund: (1) The expenses incurred for any property remaining as the interest of any natural person in any retirement fund have to include the followings amounts:-

(a) All retirement contributions made by the natural person in respect of the interest, and

(b) Where tax has been paid from the fund pursuant to Sub-section (3) of Section 64, the amounts included in the incomes for that property pursuant to Sub-section (2) during the period from the date when the fund got approval as a retirement fund to the date when the recognition ceased to exist.

Provided that, the above-mentioned amounts shall not be included in the expenses referred to in Section 38.

(2) The incomes for any property remaining as an interest of any person in any approved retirement fund have to include the exemptions claimed by that person pursuant to Sub-section (2) of Section 63 for the retirement contributions made in respect of that interest.



Chapter-13


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