Income Tax Act, 2058 (2002)



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Withholding on Payment


87. Withholding of tax by employer: (1) In making payment which has source in Nepal and is to be included in computing the income derived by any employee or worker, each resident employer shall deduct (withhold) tax at the rate referred to in Schedule-1.

(2) The liability of an employer required to withhold tax pursuant to Sub-section (1) shall not decrease or end by virtue of the followings:-

(a) In cases where the employer has the right or duty to deduct or hold up or subtract any other amount from the said payment, or

(b) In cases where the income earned by the employee or worker from employment cannot be subtracted pursuant to other laws in force.

88. Withholding of tax in making payment for investment return and service charge: (1) In making payment by a resident person for interest, natural resource, rent, royalty, service charge having source in Nepal, and if the person is an approved retirement fund, in making payment of amount of any retirement payment, the person shall withhold tax at the rate of Fifteen percent of the total amount of payment.

Provided that, tax shall be withheld from provident fund and gratuity paid by the approved retirement fund, only at the rate of six percent.

(2) In making payment by a resident person for dividend, profit made from investment insurance having source in Nepal or profit made from unapproved retirement fund, the person shall withhold tax at the rate of ten percent of the total amount of payment.

(3) Notwithstanding anything contained in Sub-section (1), in making payment of interest or of an amount in the form of interest as follows to any natural person for the deposit, a bank or financial institution shall withhold tax at the rate of Six percent of the total amount of payment:-

(a) Which has source in Nepal, and

(b) Which is not related with the operation of business.

(4) Notwithstanding anything contained in Sub-sections (1), (2) and (3), this Section shall not apply to the following payment:-

(a) Payment related to the operation of a business carried on by a natural person or any other payment except for the house rent,

(b) Interest paid to a resident bank or other resident financial institution, or

(c) Payment enjoying tax exemption or payment liable to tax withholding pursuant to Section 87.

89. Tax withholding in making payment of contraction or contract: (1) In making payment of a sum exceeding Fifty Thousand Rupees for payment of general insurance premium or contraction or contract, a resident person shall withhold tax at the rate of One and half percent of the total amount of payment.

(2) The amount referred to in Sub-section (1) shall be fixed also by adding any other payments, if any, made by such person or his/her associated person under the same contract to the person or his/her associated person entitled to payment under that contract in the past Ten days.

(3) Notwithstanding anything contained in Sub-section (1), tax shall be withheld as follows from payment made by any resident person to any non-resident person under any contraction or contract:-

(a) Where the Department has given that resident person a notice in writing, at the rate specified in the notice, or

(b) As referred to in Sub-section (1) in any other circumstances.

(4) Notwithstanding anything contained in Sub-section (1), this Section shall not apply to the following payments:-

(a) Payment made by natural persons excepts the payments made in the course of operation of any business, or

(b) Payments enjoying tax exemption or payments liable to tax withholding pursuant to Section 87 or 88.

90. Statement and payment of tax withheld: (1) Each person who has to withhold tax has to submit to the Department a statement setting out the following matters in such mode and format as specified by the Department within Fifteen days of expiration of each month:

(a) Payment subject to tax withholding made by the person withholding tax to the person subject to tax withholding pursuant to Sections 87, 88 or 89 in that month,

(b) Name, address of the person subject to tax withholding and the permanent account number in the case of one who has permanent account number,

(c) Amount of tax withheld in making each payment except that mentioned in Sub-section (3), and

(d) Any other information as specified by the Department.

(2) The person withholding tax shall pay to the Department the amount of tax withheld or deemed to be withheld pursuant to Sub-section (3), along with the statement referred to in Sub-section (1), within the time-limit referred to in Sub-section (1).

(3) Even though the person liable to withhold tax has not withheld tax pursuant to Section 87, 88 or 89, the tax shall be deemed to withheld at the time when it has to be withheld.

(4) The person withholding tax shall pay the amount of tax withheld pursuant to Section 87, 88 or 89 or deemed to be withheld pursuant to Sub-section (3); and in cases where Sub-section (5) is applicable, the person subject to tax withholding shall pay the tax within Fifteen days after the period referred to in Sub-section (1).

(5) In cases where the person withholding tax does not withhold or pay tax as follows, both the person subject to tax withholding and the person withholding tax shall be jointly and severally liable to pay the amount of tax to the Department:

(a) In cases where the person withholding tax does not withhold tax from any payment pursuant to Sections 87, 88 or 89, and

(b) In cases where the person withholding tax does not pay to the Department the amount of tax deemed to be withheld pursuant to Sub-section (3) within the date on which tax has to be paid pursuant to Sub-section (4).

(6) In cases where the person withholding tax withholds tax and pays it to the Department pursuant to Sections 87, 88 or 89 and the person subject to tax withholding makes any claim as to that payment subject to tax withholding, that amount shall be treated as if it were paid to the person subject to tax withholding.

(7) In cases where the person withholding tax pays to the Department the amount of tax not withheld pursuant to Sections 87, 88 or 89, he may recover the amount equal to the amount of tax so paid from the person subject to tax withholding.

91. Tax withholding certificate: (1) The person withholding tax shall provide the tax withholding certificate, as follows, to the person subject to tax withholding at the time as specified in Sub-section (2):

(a) Having been certified in accordance with the manner, if any, as prescribed by the Department,

(b) Setting out the amount of tax withheld pursuant to Sections 87, 88 or 89 and the paid amounts.

(2) The tax withholding certificate setting out the period of tax withholding has to be provided within Fifteen days from the date of expiration of the month in which tax is withheld.

(3) Notwithstanding anything contained in Sub-section (1), in cases where tax is withheld pursuant to Section 87, the tax withholding certificate has to be provided as follows:-

(a) The certificate shall be valid only for the period when the employee continues to serve in that income year.

(b) The certificate has to be provided within Thirty days from the expiration of that year or in cases where the employee leaves employment in the person withholding the tax in that year, it has to be provided within thirty days from the date of his leaving employment.

92. Payment from which tax is withheld finally: (1) The following payments shall be treated as payments from which tax is withheld finally:-

(a) Dividend paid by a resident company,

(b) Rent paid for the land or building and fixtures and equipment appurtenant thereto having source in Nepal to other natural person except one who is carrying on business,

(c) Profit paid by a resident person for investment insurance,

(d) Profit paid by a resident person for the interest of an unapproved retirement fund,

(e) Interest paid by a bank or financial institution as mentioned in Sub-section (3) of Section 88, and

(f) Payment subject to tax withholding made to a non-resident person pursuant to Sections 87, 88 or 89.

(2) In cases where the person withholding tax or the person subject to tax withholding pays to the Department the amount of tax withheld from the payment from which tax is withheld finally pursuant to Sections 87, 88 or 89 or the amount of tax deemed to have been withheld pursuant to Sub-section (3) of Section 90, the person referred to in clause (c) of Section 3 shall be deemed to have fulfilled the tax liability.

93. Adjustment facility and inclusion of tax not to be withheld finally: (1) In cases where any tax is withheld from any payment for purposes of computing the amount of such payment, such tax-withheld amount shall be treated as a portion of that payment.

(2) In cases where any tax is withheld from any payment except the payment from which tax is withheld finally, the person subject to tax withholding shall be deemed to have paid the amount of tax as follows:-

(a) The amount of tax withheld from payment pursuant to Sections 87, 88 or 89,

(b) In cases where the person withholding tax or the person subject to tax withholding pays to the Department the amount of tax referred to in Sub-section (3) of Section 90 or the amount of tax deemed to have been withheld from payment, such amount.

(3) The person subject to tax withholding may make a claim for adjustment of the amount referred to in Sub-section (2) only to the amount of tax payable in the income year in which that payment is made.


Chapter-18

Installment

94. Payment of tax in installment: (1) A person who has or will have assessable income in any income year from any business or investment has to pay tax in three installments as follows:




Date on which payment has to be made

Amount to be paid


By the end of Poush (mid January)

40% of the estimated tax which exceeds the already paid tax


By the end of Chaitra (mid April)

70% of the estimated tax which exceeds the already paid tax

By the end of Ashad (mid July)

100% of the estimated tax which exceeds the already paid tax


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