Tax filing in Nepal is an essential duty for all individuals and businesses earning taxable income. The taxes collected by the government are critical for funding development projects, social welfare programs, and public services. For the year 2025, understanding the tax filing process can help individuals and businesses comply with the regulations and avoid unnecessary penalties. This article provides a detailed breakdown of the tax filing process in Nepal, offering insights into registration, document requirements, tax calculation, and submission.

Overview of the Taxation System in Nepal

Nepal’s tax system operates under the oversight of the Inland Revenue Department (IRD), which functions under the Ministry of Finance. The tax system is based on the principle of progressive taxation, where the amount of tax one pays increases with income or wealth. Taxation in Nepal is broadly divided into two categories:

1. Direct Taxes: Taxes that are directly levied on income and wealth, including income tax and property tax.
    
2. Indirect Taxes: Taxes imposed on goods and services, such as VAT (Value Added Tax) and excise duties.
    

The Income Tax Act, 2058 (2002) provides the legal framework for individual and corporate taxation, outlining the procedures for filing tax returns, claiming deductions, and paying taxes.

Key Deadlines for Tax Filing in Nepal

The deadlines for tax filing in Nepal depend on the type of taxpayer and the tax being filed. Taxpayers should be aware of these deadlines to avoid penalties for late submission or payment.

• Individual Income Tax: Individuals are required to file their tax returns by Chaitra 31 (April 12) of each year, which marks the end of the fiscal year in Nepal (from Baisakh 1 to Chaitra 31).
   
• Corporate Income Tax: Companies and organizations must file their returns within three months after the fiscal year ends. For most businesses, the deadline for filing tax returns is Chaitra 31 (April 12).
   
• VAT Returns: VAT must be filed on a quarterly basis, with returns due by the end of the month following the quarter. For instance, the first quarter’s VAT returns are due by Ashadh 15 (July 1).
   

It is crucial to stay updated on any changes to the tax filing dates and ensure that all returns are filed on time.

Step-by-Step Guide to Filing Taxes in Nepal 

To file taxes in Nepal successfully, individuals and businesses must follow several essential steps. This comprehensive guide breaks down each step involved in the process.

1. Taxpayer Registration

Before filing taxes, taxpayers need to ensure they are registered with the Inland Revenue Department (IRD) and have a Taxpayer Identification Number (TIN). This registration is mandatory for all individuals and businesses earning taxable income. Registration is done online through the Taxpayer Portal.

• For Individuals: Those who earn an income above the taxable threshold, whether through salary or self-employment, must register with the IRD.
   
• For Businesses: All businesses, including sole proprietors, partnerships, and corporations, need to obtain a TIN for tax purposes.
   

To register, follow these steps:

1. Visit the IRD’s official portal.
    
2. Choose the appropriate registration option for either individuals or businesses.
    
3. Fill out the required details, including name, address, contact information, and the nature of your business (if applicable).
    
4. Upload necessary documents, such as a citizenship certificate (for Nepali citizens) or business registration certificate.
    
5. Once the registration is complete, the IRD will provide a TIN, which should be used for all future tax-related matters.
    

2. Document Preparation

Proper documentation is a critical part of the tax filing process. The IRD requires several documents from both individuals and businesses to assess tax liability and determine the correct amount of tax to be paid.

• For Individual Taxpayers: The documents typically required include:
   
  • Citizenship certificate (for Nepali citizens).
     
  • PAN card (if available).
     
  • Proof of income (such as salary slips or income statements from employers).
     
  • Bank statements showing interest income, dividends, or other earnings.
     
  • Documents related to deductions, including proof of insurance payments, education expenses, or medical expenses.
     
• For Business Taxpayers: Businesses need to provide:
   
  • Business registration certificate.
     
  • TIN and VAT registration certificate (if VAT is applicable).
     
  • Financial statements such as balance sheets, income statements, and profit and loss statements.
     
  • VAT returns (for VAT-registered businesses).
     
  • Other supporting documents justifying deductions or exemptions.
     

It’s important to ensure that all the necessary documents are collected and organized before filing your return.

3. Calculating Your Taxable Income

The next step in the process is to calculate your taxable income. This is the amount on which tax will be assessed, and it’s crucial to get this calculation right to avoid overpayment or underpayment of taxes.

• For Individuals: Taxable income for individuals includes income from salary, wages, business profits, interest, dividends, and other earnings. From this income, allowable deductions can be subtracted to arrive at the taxable income. Common deductions include:
   
  • Educational expenses.
     
  • Health and medical expenses.
     
  • Life insurance premiums and pension contributions.
     

Once the taxable income is calculated, it should be compared against the applicable tax slabs to determine the tax liability.

• For Businesses: For businesses, the calculation involves determining the net profit (i.e., income after expenses). This includes income from sales, interest, investments, and other business activities. Business expenses, such as salaries, operating costs, and depreciation, can be deducted to determine the taxable income.
   

4. Filling Out the Tax Return Form

After calculating your taxable income, the next step is to fill out the appropriate tax return form. The IRD provides online forms for both individual and corporate taxpayers.

• For Individuals: Use Form 6 for income tax returns.
   
• For Corporations: Businesses must file Form 1 for corporate income tax.
   

Follow these steps to complete the return form:

1. Log into the Taxpayer Portal using your TIN.
    
2. Select the appropriate form (Form 6 for individuals or Form 1 for businesses).
    
3. Fill in all required details, such as personal information, sources of income, allowable deductions, and tax calculation.
    
4. Carefully review the filled form to ensure that all information is accurate and that no fields are left incomplete.
    

5. Paying the Tax Due

Once the tax return form is completed, the next step is to pay the taxes due. The amount of tax payable will be displayed on the completed form. Taxes can be paid in the following ways:

• Online Payment: The IRD offers an online payment gateway where taxes can be paid using debit/credit cards or bank transfers.
   
• Bank Payment: For those who prefer to make payments through traditional banking, the IRD provides specific bank accounts where tax payments can be deposited.
   

It’s essential to keep the payment receipt, as it will be required when submitting the tax return form.

6. Submitting the Tax Return

Once payment is made, the final step is to submit the tax return form online. Upon successful submission, the IRD will generate an acknowledgment receipt, confirming that the return has been filed and processed. If any issues arise, such as missing documents or errors in the tax calculations, the IRD may request additional information or clarification.

• Make sure to retain the acknowledgment receipt and payment receipt for future reference and audits.
   

7. Maintaining Records

After filing the tax return, it is crucial to maintain proper records of all tax-related documents. The IRD may request these documents for auditing purposes or in case of a dispute. It is recommended to keep these records for at least five years after filing.

Common Pitfalls to Avoid

Even though the tax filing process in Nepal is relatively straightforward, there are common mistakes that taxpayers often make. Avoiding these errors can help ensure that your tax filing process goes smoothly and without delays.

1. Incomplete or Incorrect Forms: If the tax return form is incomplete or contains errors, it could lead to rejection or further scrutiny. Make sure that all information is accurate and complete.
    
2. Failure to Meet Deadlines: Failing to file your tax return or make payments on time can result in penalties and interest. Ensure that you are aware of the filing deadlines and make sure everything is submitted before the due date.
    
3. Missing Deductions: Many taxpayers miss out on potential deductions and exemptions, leading to a higher tax liability. Be sure to claim all eligible deductions.
    
4. Not Using the Online Filing System: The IRD now mandates that most tax returns be filed online. Be sure to use the IRD’s online portal for filing your returns and making payments.
    

Conclusion

The tax filing process in Nepal is an essential civic responsibility, and complying with tax laws is vital for the nation’s development and growth. By following the steps outlined in this guide, individuals and businesses can ensure that they meet their tax obligations in 2025. From registration to payment, each step is crucial to ensure that taxes are filed accurately and on time. By staying informed about deadlines and common mistakes, taxpayers can navigate the system smoothly and contribute to Nepal’s continued prosperity.