You missed the income tax filing deadline in Nepal

Start with what the law says the deadline is. Section 96 of the Income Tax Act 2058 requires each person to submit an income return "within three months of expiration of an income year", in the form the Department specifies, signed by the person or their manager confirming that it is true and complete, and accompanied by withholding certificates and whatever supporting documents the Department has asked for. The return itself has to state assessable income from employment, business and investment, taxable income and the tax on it, tax already deducted or paid in instalments, and the balance still owing.

The first thing to understand about missing that date is that the obligation does not expire with it. There is no provision that says a return becomes unnecessary once it is late, and there is no point at which the Department stops being entitled to it. A return for a fiscal year six years ago is still a return you owe, and the portal will still accept it. What changes is the price.

The second thing to understand is that section 98 — the extension provision — is no longer open to you. It permits the Department to extend the time limit only where the taxpayer "makes an application in writing, within the time limit for submission of such return", and only where the reasons are reasonable. The extension can be granted in one go or in stages up to a combined maximum of three months. Every word of that is written for someone who acts before the deadline. Once Ashwin end has gone without an application, there is nothing left to extend, and filing late is the only route back.

Third, separate the two things you may have missed, because they carry different consequences. One is the return — the declaration itself. The other is the tax — money that was due and has not reached the government. It is entirely possible to have missed only the first: a salaried person whose employer has deducted and deposited tax at source may owe nothing at all and still be exposed to a late-filing charge. It is equally possible to have filed on time and underpaid, which is a different problem again. Work out which of the two applies to you before you do anything else, because it determines whether your priority is paperwork or cash.

Fourth, note what section 99 does in the meantime. Where a return is filed, the tax shown in it is deemed to have been assessed. Where no return is filed, tax is still deemed assessed on the day the return was due — but only in the amount of tax already deducted under the withholding chapter plus anything paid in instalments. In other words, the system records an assessment for the year that reflects only what was collected mechanically, not what you actually earned. Nothing about your real position has been captured, and the file remains conspicuously incomplete.

That incompleteness is what eventually triggers attention. The Department does not need to prove your income to know that a registered PAN filed nothing for a year in which it issued invoices or appeared in someone else's withholding return. The gap between the deemed assessment under section 99 and reality is precisely the gap an officer is entitled to close.

The commonest misunderstanding about late filing in Nepal is that there is one "fine". There are at least three charges in the Act, calculated on different bases, and they can apply to the same year at once. Knowing which is which tells you what you can still reduce.

The first is the fee under section 117. It applies where a person fails to submit the income return required by section 96 or the income details required by section 95, and it accrues for each month and part of a month that the return is outstanding. It is not a single flat penalty: the Act sets it as the higher of a percentage of the year's assessable income — calculated without deducting the expenses you would normally claim — and a flat rupee amount per month. That structure is deliberate. A business with real turnover pays on the percentage, so the fee scales with the size of what was hidden; a person with little or no income pays the monthly floor, so a nil return that is three years late still costs something. A separate limb of the same section charges a person who has withheld tax but not filed the withholding return, calculated on the tax that should have been withheld, again for each month of delay.

The second is the interest under section 119. Its wording is short and worth reading exactly: where a person does not pay tax by the prescribed due date, "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". This is a charge on money, not on paperwork. It runs from the date the tax was payable, it does not care whether a return was filed, and it stops only when the tax is actually paid.

The third catches businesses in particular. Section 118 charges a fee where a taxpayer who pays tax in instalments has paid in less than ninety per cent of the tax that turns out to be due for the year, running from the due date of the first instalment until the tax is assessed under section 99. This one bites even when the annual return goes in on time, and it is the charge that most surprises a growing business whose profits ran ahead of its estimates.

Put together, these produce a pattern worth internalising. The section 117 fee is driven by how many months the return is late, so it stops growing the moment you file — filing a late return with no money attached still switches off the meter that is running fastest for a low-income taxpayer. The section 119 interest is driven by how long the money has been outstanding, so it keeps growing until you pay, regardless of what you have filed. If you cannot afford both at once, understanding that distinction is worth more than any calculator.

The rupee amounts, the percentage and the "normal rate of interest" referred to in these sections are not stable across years; they have been amended repeatedly, most recently by the Finance Act 2082, which the Inland Revenue Department lists against the consolidated Income Tax Act on its Acts page. Third-party "IRD fine calculators" rank well in search precisely because the official position is spread across the Act and successive Finance Acts, and those calculators are frequently built on a superseded amendment. Treat any number you find online as an estimate and confirm it against the assessment the portal or your Inland Revenue Office produces.

One further point that is easy to miss: the fee and the interest are charges in their own right, not a substitute for the tax. A year is only genuinely closed when the return is in, the tax is paid, and the fee and interest raised against that year have been cleared as well.

Nothing in the taxpayer portal blocks a late filing. The Inland Revenue Department's e-services, reached from ird.gov.np, include the taxpayer portal along with PAN search, tax clearance search and the tax calculator, and the return-filing menu lets you choose the fiscal year you are filing for. That drop-down is the part people get wrong: it defaults to the current year, and a return entered against the wrong fiscal year creates a second problem on top of the first.

Work oldest year first. Each fiscal year is a separate return with its own fee, its own interest and its own assessment, and figures from an earlier year — losses carried forward, unabsorbed credits, closing stock and closing balances — feed the year after it. Filing 2081/82 before 2079/80 means entering opening balances you have not yet established, and correcting that later is far more work than doing it in order.

Assemble the year's figures before you start typing. For a business that means the accounts for that specific fiscal year, not a reconstruction from memory: sales, purchases, expenses, closing stock, depreciation, and the bank statements that support them. For anyone with tax deducted at source, it means the withholding certificates, because section 96 expects the return to be accompanied by them and because TDS already paid is credited against what you owe. Without those certificates you may pay tax twice on the same income.

Then file. Select the fiscal year, choose the return type that applies to you, enter the income, deduction and tax figures, review them, and submit. Keep the submission reference and a copy or screenshot of the filed return. Where tax, fee or interest is payable, the portal produces a voucher, and payment can be made through the online channels the Department supports or at a bank counter. Keep both the return acknowledgement and the payment receipt — one without the other proves nothing.

Expect the arithmetic to be finalised by the office rather than by you. Late years frequently need an officer at the Inland Revenue Office or Taxpayer Service Office to raise the fee and interest lines and confirm the year as settled, and some return types cannot be completed online at all once they are far out of date. If the portal refuses a year or produces a figure you do not recognise, go to the office that holds your PAN with the printed return and the supporting file rather than resubmitting repeatedly.

Finally, do not stop at the income tax return. If you are VAT-registered, the VAT returns for the same period are a separate obligation with their own filing history, and a business that stopped filing income tax returns has usually stopped filing those too. The same applies to withholding returns and to the annual filings a private company owes the Office of the Company Registrar. Closing one and leaving the others is a half-repair that fails the first time someone checks.

The single-year case is an errand; the multi-year case is a project, and the most common outcome of drifting into it is not a large penalty but paralysis.

Begin by establishing what is actually outstanding rather than what you remember. Log in to the portal and look at the filing history against your PAN year by year. People are routinely wrong in both directions: an accountant may have filed a nil return for a year you assumed was missing, or a year you believe was handled may show nothing at all because a payment was made without the return being submitted. Write down the list of genuinely open years before you spend money on any of them.

Then decide what standard of record each year can realistically be brought to. A sole trader on a presumptive basis needs turnover and little else. A private limited company needs accounts for each year, and those accounts need auditing before the return can properly be filed — which means a chartered accountant, a fee per year, and time. If the company has been dormant, say so in the accounts; a genuinely dormant year is quick to file and cheap to audit, and leaving it unfiled is what makes it expensive.

Reconstruct from banks and counterparties, not from memory. Bank statements for the period, the VAT returns you did file, the withholding certificates issued to you by customers who deducted tax, purchase invoices from suppliers who kept better records than you did, and rent agreements will between them recreate most of a small business's year. Where a genuine gap remains, a reasoned estimate documented in the working papers is better than a round number nobody can explain — the officer's question will be how you arrived at the figure, not whether it was elegant.

Sequence the payments if you cannot make them all. The Act writes in no formal instalment arrangement for arrears, but a taxpayer who arrives at the Inland Revenue Office with a plan, files the returns and starts paying is treated very differently from one who is found. Filing every open year at once — even where you can pay against only one — stops the section 117 fee accruing on all of them simultaneously, usually the fastest reduction available to you.

Know which office holds your file. The Department operates Inland Revenue Offices and Taxpayer Service Offices across the country, with a Large Taxpayers Office at Hariharbhawan in Lalitpur and a Medium Level Taxpayers Office at Babarmahal in Kathmandu, and its contact page lists the district offices and their telephone numbers. The office that registered your PAN is the one that will resolve the arrears; ringing it before you attend, and asking what to bring for a multi-year settlement, saves an entire wasted trip.

Finally, be honest with your accountant about the whole period. Presenting three of five missing years produces filings that contradict each other — opening balances that do not match, stock that appears from nowhere — and inconsistency across your own returns is far more damaging in an amended assessment than lateness ever was.

Not filing does not mean the year stays blank. The Act gives the Department a route to assess a taxpayer who has not assessed themselves, and once it is taken the initiative passes out of your hands.

The starting position is the deemed assessment under section 99: with no return filed, the tax assessed for the year is treated as the total of amounts withheld under the withholding chapter and anything paid in instalments, deemed assessed on the day the return was due. That is a placeholder, not a conclusion, and it is the thing an officer amends.

Section 101 then allows the Department to amend an assessment made under section 99 or 100 on reasonable grounds — adjusting the assessment to what the officer considers the correct position. Where an assessment was wrong because of fraud, the Department may amend it at any time, and must do so within a year of the fraudulent details coming to light. The ordinary time limits do not protect a taxpayer who concealed rather than merely delayed.

The procedural protection you do get is a notice and a chance to answer. The Department must give written notice "clearly setting out the grounds for such amendment", and the Act allows seven days for the taxpayer to submit proof and evidence in defence. Seven days is short. It runs whether or not your accountant is available, whether or not you are in the district, and whether or not the notice reached you before it was left at your registered address. This is the single strongest practical reason to keep the address, email and mobile registered against your PAN current — a notice you never saw still ran its clock.

Treat that seven-day window as the moment the case is decided, because in most disputes it is. An officer working without your records has to estimate, and estimates built from bank credits and comparable businesses are rarely generous. Producing the accounts, the withholding certificates and the bank statements inside the window is how the assessed figure comes down; arguing afterwards is slower, costlier and less likely to work.

There is one limit on the Department's power worth knowing: it may not amend an assessment upwards where the Revenue Tribunal or a competent court has already reduced it, unless that body ordered the matter to be re-examined. A decided dispute stays decided.

If an amended assessment does land and you believe it is wrong, read the notice itself for the review and appeal route and the deadline attached to it, and act inside that deadline. Nepal's tax appeal structure runs from administrative review within the Department to the Revenue Tribunal, and both stages have time limits and procedural conditions that a taxpayer cannot cure after the fact. Missing an appeal deadline turns a contestable figure into a final debt, which is exactly the mistake that started the problem in the first place.

Every few years Nepal announces a relief scheme for taxpayers in arrears, and every announcement produces the same reaction — a decision to wait for the next one. Understanding where these schemes come from shows why waiting is a poor strategy.

Reliefs of this kind are not gifts from the Inland Revenue Department. They are legislated in the annual Finance Act — the Arthik Ain that accompanies the budget — which the Ministry of Finance publishes alongside the budget speech, the appropriation act and the economic survey. The Department's own Acts page lists the Economic Act 2083 and records that the Income Tax Act 2058, the Value Added Tax Act 2052 and the Excise Act 2058 are all as amended by the Finance Act 2082. That is the machinery: parliament legislates the relief for a defined period, and the Department then issues the notices and forms that implement it. The Department cannot invent a waiver, and no officer can grant you one outside a scheme that exists in law.

Because they are legislated year by year, these schemes are narrow and conditional by design. They typically require the principal tax to be paid, waive only the fee and interest on top of it, cover only specified years, and close on a fixed date. The relief is not automatic either — implementation notices and application forms are published by the Department, and a taxpayer who does not file within the window gets nothing even if the scheme was written for exactly their situation.

The place to check is the Department's own notices page — the channel that carries invoice rules, taxpayer incentive programmes and exemption implementation forms under the Economic Act 2083, and any amnesty alongside them — with the Ministry of Finance's publications for the underlying Finance Act text. If a scheme is running, it will be there in writing, with conditions and a deadline.

Now the arithmetic of waiting. While you wait for a scheme that may or may not be legislated, the section 117 fee accrues month by month on every unfiled year and the section 119 interest accrues on unpaid tax. If a waiver does arrive and covers fee and interest but requires the principal, you pay the same principal you would have paid years earlier — having carried an open file, no tax clearance certificate and exposure to an amended assessment in the meantime. If it does not arrive, the bill is simply larger.

There is also a scam attached to this. Anyone offering, for a fee, to have your penalties cancelled, your file quietly closed, or your name moved to a favourable list is selling something the law does not permit them to deliver. Waivers are published; they are conditional; they apply to whoever meets the conditions. The only people who can raise or reduce your assessment are the officers of the Inland Revenue Office handling your PAN, working within the Act and the current Finance Act — and their process leaves a paper trail you are entitled to see.

For most people the fee and the interest are not what eventually forces the issue. It is the discovery that a PAN with unfiled years cannot produce the one document half of Nepal's formal economy asks for — a tax clearance certificate.

The Inland Revenue Department publishes a tax clearance search among its e-services: you enter a PAN, a fiscal year and a tax clearance number, and the system confirms the clearance. That design tells you everything about the consequence of a missing return. Clearance is issued and searchable against a specific fiscal year. A year with no return filed and no tax settled has no clearance to search for, and no amount of explanation to the counterparty substitutes for a record that does not exist.

Public procurement is where this hurts businesses first. The Public Procurement Monitoring Office runs Nepal's e-GP system and publishes the standard bidding documents that set out what a bidder must submit, along with the blacklist of entities excluded from public contracts. A contractor or supplier who cannot produce current tax clearance is not arguing about scoring — the bid does not qualify. The same document lands in the eligibility file for consultancy assignments, government supply orders and much donor-funded work.

Company compliance is the second pressure point. The Office of the Company Registrar administers company registration and post-incorporation services through its CAMIS system and expects annual documentation from registered companies. Company filings and tax filings are separate obligations to separate authorities, but they reference each other in practice — audited accounts prepared for one are the accounts filed with the other — and a company that has stopped doing one has almost always stopped doing both. Restoring a company to good standing generally means fixing both files, not one.

Then there is credit. Banks assessing a business loan want audited accounts and filed returns for recent years, and the returns are what make the accounts credible — anyone can produce a profit statement, but one that matches a filed return is evidence. A sole trader with three unfiled years is asking a lender to take their word for their income, and loan applications fail on this quietly.

The list continues in smaller ways: renewals that ask for tax clearance, customers who will not accept a VAT bill from a supplier whose status they have checked, visa applications abroad that ask for evidence of declared income, and the sale of a business where the buyer's advisers find the gap immediately. None of these is a penalty in the legal sense. All of them are costs.

It is worth naming the reverse case honestly too. A person whose tax was fully deducted at source, who owes nothing and has simply not filed, faces a paperwork charge and an incomplete record rather than a debt — and clears it by filing the outstanding returns. The gap between that person's position and a business with five unfiled years and real undeclared turnover is enormous, and the anxiety attached to the phrase "missed the deadline" is often wildly out of proportion to which of the two you are.

Once the open years are closed, the job is making sure it does not happen again — and the failure is almost never a lack of good intentions. It is a credentials problem, a calendar problem and a records problem.

Fix the credentials first, in a quiet month. Confirm that the email address and mobile number registered against your PAN belong to you rather than to a former accountant or an old employer, and that you can log in to the taxpayer portal today. The worst possible time to discover a broken login or a stale registered email is the last week of Ashwin, when the offices are crowded and the portal is under load. If the details need changing, that is an errand for your Inland Revenue Office with your identity documents, not something you can do at midnight.

Then fix the calendar, and put the instalment dates on it as well as the annual return. The Act contemplates tax being paid in instalments during the year, and section 118 charges a fee where those instalments come to less than ninety per cent of the tax the year turns out to owe. A business that treats the annual return as its only tax date has already accepted that charge. Check the current instalment dates for your category against the Department's own calendar rather than relying on last year's memory.

Keep the records as you go, in the form the return needs. The most reliable predictor of a missed deadline is that the accounts were not ready — because a year of invoices, statements and receipts was being assembled in a fortnight. Reconciling the bank account monthly and filing the withholding certificates you receive turns the return into a data-entry job rather than an investigation.

If you know in advance that you cannot make the date, use section 98 properly. It requires a written application to the Department made within the time limit for submitting the return, granted where the reasons are reasonable, and it can extend the deadline by up to three months in one or more steps. Note what it does not say: the section is about the time limit for submitting the return, and it says nothing about suspending anything else. An extension is a filing accommodation, not a payment holiday.

Lastly, keep your own copies. The portal holds your filing history, but the acknowledgement of each filed return, the payment receipt and the tax clearance certificate for each year are what a bank, a procuring entity or a buyer will ask for — often years later, at short notice. A scanned folder per fiscal year is the cheapest insurance in this guide.

And if you have read this far because a notice has already arrived, deal with the notice first and the tidying afterwards. A written notice from the Department carries a defined period to respond, and everything else on this page can wait until you have answered it.