What's the penalty for filing your income tax return late in Nepal?
File your income tax return late in Nepal and you owe two things: a small Section 117 fee and 15% a year interest on unpaid tax. The real cost is the tax clearance you can't get.
A freelancer texts in Mangsir, mid-winter, having realised the income-tax deadline in Ashoj slid past while she was heads-down on a project. Her first question is the one everyone asks: how big is the fine? She is picturing a number with a lot of zeros, the kind that makes you want to not file at all and hope nobody notices.
The number is smaller than she fears. Filing a couple of months late, on the income she describes, the fee is a few hundred rupees. The part worth taking seriously is different: the 15% a year that runs on any tax she actually owes, and the tax clearance certificate she will not be able to pull the next time a visa or a loan asks for one. Missing the date is cheap. Staying unfiled is what costs.
First, check whether you even have to file
Before worrying about a penalty, confirm the obligation exists, because a lot of salaried readers do not have one. Under Section 97, a resident individual whose only income is salary from a single employer, with TDS deducted by that employer, is not required to file a separate return. The tax was settled every month on the payslip. The PAN for salaried post covers why you still need a PAN even when you do not file.
You do have to file if your situation is more tangled: a second employer, freelance or consulting income, a business, rental income, or capital gains that were not fully withheld. The freelance and side-income tax post is the one to read if you earn on the side, because that is the income the single-employer exemption does not cover. There is no clean Rs 4 million cap written into the exemption itself; the Rs 40 lakh figure that gets quoted is an administrative line used mainly for the instant online tax-clearance route, walked through in the online filing guide.
The deadline, and the extension you can ask for
Section 96 sets the return due within three months of the fiscal year closing. Nepal's year ends at Ashadh end in mid-July, so the filing deadline lands at the end of Ashoj, around mid-October. For FY 2081/82 income, that meant Ashoj end 2082.
Section 98 lets you apply, in writing and before the deadline, for an extension of up to three months. Granted, it pushes your filing date to the end of Poush, roughly mid-January. Two things about that extension are worth pinning down:
- It stops the late-filing fee, because filing inside the extended window means you are not late.
- It does not stop the interest. Section 119 states plainly that interest is not exempted during a Section 98 extension. If you owe tax, the 15% clock started at the original due date and keeps ticking through the extension.
So an extension buys you time to prepare the return, not a holiday from what you owe.
The late-filing fee: Section 117
If you miss the date without an extension, the fee is the higher of two figures: Rs 100 for each month you are late, or 0.1% a year of your gross assessable income. "Gross" matters here, the Act says the income is taken without deducting the amounts you would normally deduct, so it is measured on the larger number.
See how it plays out across incomes, assuming six months late:
| Gross assessable income | 0.1% per year | Rs 100 × 6 months | Fee (the higher) |
|---|---|---|---|
| Rs 5,00,000 | Rs 500 | Rs 600 | Rs 600 |
| Rs 12,00,000 | Rs 1,200 | Rs 600 | Rs 1,200 |
| Rs 30,00,000 | Rs 3,000 | Rs 600 | Rs 3,000 |
For a small presumptive taxpayer under Section 4(4), the D-01 filer, it is simply Rs 100 a month. If you pay tax in installments and skip the estimated-tax return, a separate Section 117 fee of Rs 5,000 per return can apply. None of these are the kind of number that should tempt anyone into hiding from the IRD.
The interest: 15% a year, and this is the real clock
The fee is small. The interest is where a late filing gets expensive, and only if you actually owe tax that has not been paid.
The Income Tax Act 2058 defines its "general interest rate" in Section 2 as fifteen percent per annum, and Section 119 applies that rate to unpaid tax, counted for each month and part-month. This is not a practitioner rule of thumb; it is in the statute's own definitions.
Work a real figure. Say your return shows Rs 50,000 of tax that was not withheld and not paid:
| Time unpaid | Interest at 15% per annum |
|---|---|
| 3 months | Rs 1,875 |
| 6 months | Rs 3,750 |
| 12 months | Rs 7,500 |
A related interest charge, Section 118, catches taxpayers who pay in installments and pay too little. If your installments come to less than 90% of the tax finally due, the 15% rate applies to the shortfall. The installment schedule itself, set in Section 94, is 40% by Poush end, 70% by Chaitra end, and 100% by Ashadh end.
Three charges people mix up
Half the confusion around tax penalties comes from treating three different things as one. They are separate, and they can stack.
| Charge | Section | What triggers it |
|---|---|---|
| Late-filing fee | 117 | Filing the return after the deadline |
| Late-payment interest | 119 | Tax due but not paid, 15% a year |
| False-return fee | 120 | An understated or misleading return found on assessment |
The Section 120 fee is the heavy one and it has nothing to do with being late. It is 50% of the tax you short-paid if the error was a genuine mistake, and 100% if it was knowing or reckless. Filing late and honestly keeps you in the cheap Section 117 and 119 territory. Filing a return that hides income is what invites the 50% or 100% hit.
The cost that actually hurts: no tax clearance
For most people the fee and interest are survivable. The consequence that changes plans is the tax clearance certificate you cannot obtain while a return is unfiled or tax is outstanding.
That certificate is the document a foreign embassy wants for a visa, a bank wants for a loan file, a government office wants for a tender, and a regulator wants for a licence renewal. When an old unfiled year quietly blocks it, the problem surfaces at the worst moment, days before a deadline you cannot move. This is the practical reason to file even when the tax owed is zero: keeping the record clean keeps the certificate available on demand.
The amnesty window worth using now
If you are already behind, the timing is unusually good. The Finance Act 2083 opened a settlement window: pay the principal tax plus roughly 1% and the interest, fees and penalties are waived, with the window closing around the end of Poush 2083, about mid-January 2027. A parallel route lets someone who never got a PAN register, file for FY 2079/80 through 2082/83, pay what is due, and have the fees and interest forgiven.
For anyone carrying a couple of unfiled years, this clears them for close to the tax itself, without the 15% interest compounding on top. The 2083/84 budget overview has the wider set of changes; for the amnesty specifically, confirm your exact category and cut-off date with the IRD before you rely on it, since sub-deadlines vary.
What you actually need to know
- The fee is small, the interest is the clock. Section 117 costs the higher of Rs 100 a month or 0.1% of gross income. Section 119 charges 15% a year on unpaid tax, and that is what grows.
- The deadline is Ashoj end, extendable to Poush end. An extension stops the fee but never the interest. Most single-employer salaried people do not need to file at all.
- Staying unfiled is the expensive choice. It blocks your tax clearance certificate, and the current FY 2083/84 amnesty lets you clear old years for principal plus about 1% until mid-January 2027.
Not sure whether you were required to file, or staring at an old unfiled year and wondering what it will cost to fix? Email parjanya57@gmail.com with the fiscal years involved and I will help you map it.
This post is part of the Nepal Money Basics guide — the tax section.
Frequently asked questions
- What is the penalty for filing income tax late in Nepal?
- Two separate charges. The late-filing fee under Section 117 of the Income Tax Act 2058 is the higher of Rs 100 per month or 0.1% per year of your gross assessable income. On top of that, Section 119 charges interest at 15% per annum on any tax you owe but have not paid, counted month by month from the due date. For a small presumptive taxpayer the fee is a flat Rs 100 per month. The fee is usually modest; the 15% interest is what grows if there is actual tax outstanding.
- When is the income tax return deadline in Nepal?
- Section 96 requires the return within three months of the fiscal year ending, which puts the deadline at the end of Ashoj, roughly mid-October. You can apply in writing under Section 98 for an extension of up to three months, pushing it to the end of Poush, around mid-January. Filing within a granted extension avoids the Section 117 late-filing fee, but it does not stop Section 119 interest, which keeps running on unpaid tax from the original due date regardless of any extension.
- Do salaried people have to file a tax return in Nepal?
- Often not. A resident individual whose only income is salary from a single employer, with TDS already deducted by that employer, is not required to file a separate income return under Section 97. The tax is settled at source. You step into the filing net if you have a second employer, freelance or business income, rental income, or other untaxed sources. There is no separate Rs 4 million statutory cap on the single-employer exemption in the Act itself; the Rs 40 lakh figure that circulates relates to administrative practice for online tax clearance.
- How much is the interest on unpaid income tax in Nepal?
- 15% per annum. The Income Tax Act 2058 defines the general interest rate in its Section 2 definitions as fifteen percent a year, and Section 119 applies that rate month by month to tax that is due but unpaid. So Rs 50,000 of unpaid tax left for six months accrues about Rs 3,750 of interest, and Rs 7,500 over a full year. This interest is separate from, and stacks on top of, the Section 117 late-filing fee.
- Is there a tax amnesty for late filers in Nepal right now?
- Yes. The Finance Act 2083 opened a settlement window: pay your principal tax plus about 1% and get a full waiver of interest, fees and penalties, with the window closing around the end of Poush 2083 (mid-January 2027). A parallel provision lets people who never obtained a PAN register, file for FY 2079/80 through 2082/83, pay the tax due, and have fees and interest waived. If you have old unfiled years, this is the cheapest time to clear them. Confirm your exact category and deadline with the IRD.
- What happens if you never file your income tax return in Nepal?
- Beyond the accumulating fee and 15% interest, you cannot get a tax clearance certificate, and that is where non-filing actually bites. A tax clearance certificate is commonly required for visa applications, bank loans, government tenders, and licence renewals, and the IRD will not issue one while a required return is unfiled or tax is outstanding. Separately, if an assessment finds you filed a false or understated return, Section 120 adds a fee of 50% of the shortfall if it was a mistake, or 100% if it was deliberate.