How do I pay Income Taxes generally?
Payment of Instalment Tax
As per Section 94 of the Income Tax Act 2058, a person who derives or expects to derive any assessable income during an income-year from a business or investment shall be required to pay tax for the year by three instalments as follows:
Date Payable | Amount Payable |
By the end of Poush of the Fiscal Year | Due tax amount out of 40% of the estimated tax |
By the end of Chaitra of the Fiscal Year | Due tax amount out of 70% of the estimated tax |
By the end of Ashad of the Fiscal Year | Due tax amount out of 100% of the estimated tax |
However, where the amount of total instalments calculated as above is less than Rs 7,500 the amount of the instalment shall not be required to be paid.
What if I don’t pay my instalment taxes?
As per Section 118(2), when instalment tax to be deposited under Section 94 is not made as prescribed, standard interest rate (higher integer months basis) is applicable in the due amount, for the period between the due date for the particular instalment (Poush End for 1st Instalment, Chaitra End for 2nd Instalment and Ashad End for the 3rd Instalment) and the due date for filing the Income Tax Return (Ashoj End). However, the amount that is considered for the application of this interest is 90% of the amount of estimate or revised estimate payable as the instalment of tax for each instalment period for the year less the amount of each instalment paid by the person for an income year.
Example of Interest Calculation
| Tax Liability for Year | 2,800,000 | ||||
| Instalments | Instalment Due | Instalment Paid | 90% of Due Instalment | Defecit Amount | Interest @ 15% for 3 Months |
| 1st Instalment (40%) | 1,120,000 | 500,000 | 1,008,000 | 508,000 | 19,050.00 |
| 2nd Instalment (70%) | 1,960,000 | 1,200,000 | 1,764,000 | 564,000 | 21,150.00 |
| 3rd Instalment (100%) | 2,800,000 | 2,000,000 | 2,520,000 | 520,000 | 19,500.00 |
Submission of Instalment Tax Return
Every person who is an instalment payer for an income-year shall file with the Department by the date for payment of the first tax instalment for the year a statement of estimated taxes.
What if I don’t file my Intalment Tax Return?
As per Section 117(1)(Ka) when estimated Income Tax Return is not filed by the taxpayer, fines at the rate of 0.01% of the of Assessable Income or Rs. 5,000 whichever is higher is charged.
Payment of Remaining Income Taxes
As indicated in the above table, 10% of the estimated taxes or more may still be due for payment at the time of filing the income tax return (i.e Ashoj End).
As per Section 96 every person shall file not later than 3 months after the end of each income year a return of income for the year. Since, the interest on delay on payment of third instalment is applicable till the Ashoj end. The amount of tax dues, if any, till this date should be cleared by this date.
Elsewise, as per Section 119(1) failure to pay tax on or before the date on which the tax is payable, will attract standard interest rate (higher integer months basis) is applicable in the due amount, for the period between the due date for filing the tax return and date for payment of taxes. However, for the purposes of calculating this interest payable, any extension granted to file the income tax return is ignored.
What happened to payment of Income Taxes during FY 76/77?
Covid happended during the fiscal year 76/77. Lockdown related notices during FY 76/77
#Lockdown Notices in Nepal
- Notice Date: 2076.12.09 Lockdown 2076.12.11 to 2076.12.18, Link
- Notice Date: 2076.12.16 Lockdown 2076.12.11 to 2076.12.25, Link
- Notice Date: 2076.12.24 Lockdown 2076.12.11 to 2077.01.03, Link
- Notice Date: 2077.01.02 Lockdown 2076.12.11 to 2077.01.15, Link
- Notice Date: 2077.01.14 Lockdown 2076.12.11 to 2077.01.25, Link
- Notice Date: 2077.01.24 Lockdown 2076.12.11 to 2077.02.05, Link
- Notice Date: 2077.02.04 Lockdown 2076.12.11 to 2077.02.20, Link
- Notice Date: 2077.02.17 Lockdown 2076.12.11 to 2077.02.32, Link
- Notice Date: 2077.02.28 Lockdown 2077.02.28 to 2077.03.17, Link
- Notice Date: 2077.03.15 Lockdown 2077.02.28 to 2077.04.06, Link, Link
- Notice Date: 2077.04.05 Limited Operations 2077.04.06 to 2077.05.02, Link, Link, Link, Link
- Notice Date: 2077.05.02 Shutdown 2077.05.03 to 2077.05.10, Link
- Notice Date: 2077.05.10 Shutdown 2077.05.10 to 2077.05.17, Link
- Notice Date: 2077.05.17 Shutdown 2077.05.17 to 2077.05.24, Link
- Notice Date: 2077.05.24 Shutdown 2077.05.24 to 2077.05.31, Link
- Notice Date: 2077.05.31 Limited Operations 2077.06.01 until further notice, Link
- Notice Date: 2078.01.13 Shutdown 2078.01.16 to 2078.01.22, Link
- Notice Date: 2078.01.21 Shutdown 2078.01.22 to 2078.01.29, Link
- Notice Date: 2078.01.21 Shutdown 2078.01.22 to 2078.01.29, Link
- Notice Date: 2078.01.28 Shutdown 2078.01.29 to 2078.02.13, Link
- Notice Date: 2078.02.11 Shutdown 2078.02.14 to 2078.02.20, Link
- Notice Date: 2078.02.11 Shutdown 2078.02.14 to 2078.02.20, Link
- Notice Date: 2078.02.19 Shutdown 2078.02.21 to 2078.02.31, Link
Extensions provided by Ministry fo Finance relating to payment of taxes:
#Extensions for payment of Taxes for FY 76/77
So, What do I do?
- Lockdown period of 2076.12.11 to 2077.04.06,
- Limited operations period of 2077.04.06 to 2077.05.02 and
- Prohibition order period of 2077.05.03 to 2077.05.31
the interest on instalment taxes under Section 118 and interest on taxes payable under Section 119 and taxes to be paid will depend on the notices of MoF and challenges made to MoFs notices in Supreme Court.
The writ petition is currently sub-judice before the Supreme Court and it is less likely that the decision will come in favor of Ministry of Finance et.al.
So, in context of above, since the lockdown/prohibition orders was ended only in 2077.05.31 completely,
- Interest on delay of payment of second and third instalment taxes, under Section 118 of the Income Tax Act, is not likely to be applicable, and
- The interest on delay in taxes to be paid on due date (i.e. before Ashoj 2077) under Section 119, is likely to be applicable only for Kartik, Mangsir and Poush 2077 in regard to the Supreme Court’s Interim Order, which is likely to come in the favor of the taxpayers.
The Supreme Court issued an interim order in the name of Ministry of Finance et.al. on 2078/05/04 not to impose taxes during the lockdown/shutdown period. Find the link to Supreme Court’s Interim Order here.