Most tax penalties we see in practice are not the result of aggressive positions — they are the result of missed routine deadlines. Nepal's system layers monthly, trimester and annual obligations, and a business that maps them onto a single calendar rarely pays a rupee of late fees. This note sets out the recurring deadlines under the Income Tax Act, 2058 and the VAT Act, 2052.
The monthly cycle: VAT and TDS
VAT-registered businesses must file a VAT return and pay any net VAT within 25 days of the end of each Nepali month. The same 25-day window applies to depositing tax withheld at source (TDS) and to filing the electronic withholding return (e-TDS) with the Inland Revenue Department.
Because the three obligations share one deadline, we recommend a single monthly close routine: reconcile sales and purchase registers to the ledger, verify withholding on every service, rent and interest payment, then file VAT and e-TDS together. Businesses that leave filings to the deadline day routinely discover reconciliation differences with no time left to resolve them.
The trimester cycle: advance income tax
Entities with estimated annual tax above the prescribed threshold pay income tax in advance in three instalments: 40 percent of the estimated annual liability by the end of Poush (mid-January), 70 percent cumulatively by the end of Chaitra (mid-April), and 100 percent by the end of Ashad (mid-July). The estimate can be revised as the year progresses, but a materially low estimate attracts interest, so the instalment calculation deserves a genuine forecast rather than a copy of last year's figure.
The annual cycle: return, audit and AGM
- Complete the statutory audit — the return must be based on audited financial statements.
- File the income tax return within three months of fiscal year end (by Ashoj end, roughly mid-October); apply before that date for an extension of up to three further months if needed.
- Settle any balance of tax with the return to stop interest accruing.
- Hold the AGM and file annual returns with the Office of the Company Registrar within statutory time limits.
What late filing actually costs
Late VAT filings attract fixed late fees plus interest on unpaid tax; late TDS deposits attract interest and expose the payer to the withheld amount itself; and a late income tax return without an approved extension triggers fees calculated on turnover or assessable income — whichever produces more. The pattern is consistent: the cost of compliance done on time is a fraction of the cost of the same compliance done late.
Frequently asked questions
- When does Nepal's fiscal year start and end?
- The fiscal year runs from Shrawan 1 to the end of Ashad — approximately 16 July to 15 July in the Gregorian calendar.
- Can the income tax return deadline be extended?
- Yes. An extension of up to three months is available on application to the Inland Revenue Department before the original three-month deadline expires. The extension covers the return, not payment — interest still runs on unpaid tax.
- Do the advance tax instalments apply to every business?
- They apply to taxpayers whose estimated annual tax exceeds the prescribed threshold. Most operating companies fall within the regime; newly incorporated or very small entities should confirm their position each year.
This note is general information prepared by A. Adhikari & Associates, Chartered Accountants, and is not professional advice for any specific situation. Rates, thresholds and procedures change through annual Finance Acts and regulatory updates — please consult our team before acting.
