Pathao and InDrive rider income: what you owe the taxman and what you can deduct
Most Kathmandu riders owe less income tax than they fear. From Shrawan 2083 the platform skims 1% off every payout anyway. The regimes, the math, the deductions.
The Pathao rider who brought me home from Jawalakhel last month has been riding full-time for three years. Good months gross him somewhere around Rs 50,000 in fares. I asked, out of professional habit, what he does about tax. He laughed. Nobody he knows has ever filed anything, no office has ever asked, and as far as he could tell the whole question was theoretical.
Until this Shrawan, he was mostly right. From July 17, he stops being right, because the tax office stops needing him to volunteer.
Sixty thousand riders, and a law that finally noticed
Ride-sharing ran informally in Nepal for seven years before the government listed it as a legitimate service industry through a Nepal Gazette notice in February 2024. By April 2026, a riders' association count reported by the Kathmandu Post put more than 60,000 two-wheeler riders on the Valley's platforms, working commissions of 10 to 20% per ride depending on the company.
The tax system spent those years unable to decide what to do with the industry. A 2023 Kathmandu Post editorial, leaning on the Auditor General's review of 25 ride-hailing companies, described apps that were neither registered nor paying tax; Pathao's VAT liability had to be assessed at around Rs 3 million by the tax office back in 2019, fine included, because it had registered but not billed the tax. Individual riders barely figured in any of it.
So the honest starting point is this: your earnings were always taxable. What has been missing is a mechanism that collects, and that mechanism arrives this Shrawan.
The four ways rider income can be taxed
Under the Income Tax Act 2058, money earned driving for a platform is business income of a natural person. Depending on your vehicle, turnover and profit, one of four regimes applies.
| Regime | Who qualifies | What you pay | Return? |
|---|---|---|---|
| Presumptive vehicle tax (Schedule 1(13)) | Owner of a vehicle on hire: cars, jeeps, vans, three-wheelers, EVs. No two-wheeler line through FY 2082/83 | Flat Rs 5,500–9,000/year for cars by engine size; Rs 3,000–7,500 for EVs by kW. Paid at bluebook renewal | No. Final tax if it is your only income |
| Small-taxpayer flat tax (D-01) | Turnover up to Rs 30 lakh and taxable income up to Rs 3 lakh | Flat Rs 7,500 in a metropolitan or sub-metropolitan city; Rs 4,000 in a municipality; Rs 2,500 rural | Yes, the short D-01 |
| Turnover tax | Turnover Rs 30 lakh to Rs 1 crore, income under Rs 10 lakh | 2% of turnover for service businesses | Yes |
| Normal slabs, actual books | Everyone else, or anyone who opts to keep accounts | Slab rates on net profit after expenses | Yes |
Two of these deserve a closer look, because between them they cover almost every actual rider.
The taxi shortcut: one payment at bluebook renewal, done
Schedule 1, clause 13 of the Act says the annual tax on a rented motor vehicle is collected through the Department of Transport Management at registration and renewal. For a natural person whose only income is from that vehicle on hire, the PKF Nepal tax card for FY 2082/83 is explicit: no income tax return is required (the carve-out: a natural person otherwise registered as a sole proprietor still files). The flat payment is the whole relationship.
The FY 2082/83 amounts for the taxi class: Rs 5,500 a year for a car, jeep, van or microbus up to 1300cc, stepping up through Rs 6,000 (1301–2000cc) and Rs 6,500 (2001–2900cc) to Rs 9,000 above 4000cc. Electric vehicles pay Rs 3,000 to Rs 7,500 depending on motor capacity. An InDrive car driver on a 1500cc hatchback settles a full year of income tax for Rs 6,000, paid alongside the road tax they were at the counter for anyway.
For anyone running a car on the platforms full-time, this is startlingly cheap. Rs 6,000 flat against fare income that can run into several lakh is a fraction of a percent, and it is final.
The bike rider's gap: no shortcut exists, until this year
Scan that Schedule 1 list and something is missing. It runs from three-wheelers up through buses, dozers and oil tankers. Two-wheelers, the vehicle 60,000-plus Valley riders actually sit on, are not on it. A bike rider cannot buy the flat-tax shortcut; their income legally falls back into the ordinary business-income regimes.
The Finance Bill 2083 fixes the omission: presumptive rates rise across every vehicle category, and dedicated two-wheeler and e-rickshaw lines arrive from FY 2083/84. ICAN's reproduction of the amended schedule prints the new figures: Rs 3,000 a year for a two-wheeler, Rs 3,500 for an e-rickshaw, with the car lines stepping up to Rs 6,500 through Rs 11,000. If the Finance Act passes as printed, a full-time bike rider's entire annual income tax could become one Rs 3,000 payment at bluebook renewal, which for most riders would be the cheapest and simplest legal option available.
Until then, the bike rider's default is the slab math below, and the news there is better than most riders assume.
What changes on Shrawan 1, 2083
Two new mechanisms take effect on 17 July 2026, both aimed at the platforms rather than at you, and both reaching you anyway.
A 1% advance tax on your payouts. The Finance Bill adds a new sub-section to Section 95A of the Income Tax Act, requiring ride-sharing platform operators to collect 1% advance tax on payments made to natural persons providing services through the platform. Note the word advance: for anyone who files, this is a prepayment credited against the final bill, and ICAN's reading of the bill adds that for a natural person who chooses not to file, the withholding simply becomes final. One thing the bill leaves genuinely unresolved, flagged publicly by inDrive's own head of public policy, is the base. Whether the 1% bites the total fare, gross earnings, or the net payout after commission awaits an IRD circular.
A 5% VAT on rides, collected by the platform. Ordinary passenger transport is VAT-exempt under Schedule 1 of the VAT Act, which left years of ambiguity about whether ride-hailing owed the standard 13% on the full fare or only on the platform fee. The bill settles it with a special rate: platforms determine and collect 5% VAT on the taxable value of vehicle and delivery services booked through them. Legally this is the passenger's burden. Practically, if platforms hold fares flat to stay competitive, some of it lands on the rider's split; Pathao's Nepal MD has publicly backed the 5% as balanced, while inDrive has been openly critical.
The quieter consequence of the 1% is informational. Every withholding remitted under your name gives the IRD a running total of your earnings. The era in which a rider's income was invisible to the state ends with the first Shrawan payout.
What you can deduct if you file on actual books
Register a PAN, keep records, and the taxable number stops being your gross fares. Section 13 of the Act allows expenses incurred in earning business income. For a rider that means:
- Platform commission. Pathao has stated its commission at 20%; inDrive launched in Nepal charging 10%. This is often a rider's single biggest cost and it comes straight off the top.
- Fuel, servicing, repairs, tyres. The daily running costs of the machine that earns the money.
- Depreciation. Automobiles sit in Pool C at 20% written-down value under Schedule 2. A Rs 3 lakh bike sheds Rs 60,000 of book value in a full first year, all of it deductible (a purchase late in the year gets a prorated first-year rate).
- A reasonable share of phone and data. The app runs on it; apportion honestly between work and personal use.
The catch is documentation. Fuel receipts, servicing invoices, the platform's own earning statements. A deduction you cannot evidence is a deduction the tax office can strike.
A worked year: the full-time bike rider
Take a rider grossing Rs 50,000 a month in fares on Pathao, Rs 6,00,000 a year. This is a calculation from the sourced rates above, with the expense figures as stated assumptions rather than researched averages.
| Line | Amount (Rs/year) |
|---|---|
| Gross fares (turnover) | 6,00,000 |
| Less: platform commission at 20% | −1,20,000 |
| Less: fuel and servicing (assumed Rs 8,000/month) | −96,000 |
| Less: phone and data share (assumed Rs 1,000/month) | −12,000 |
| Less: depreciation, Rs 3 lakh bike, Pool C 20% | −60,000 |
| Net taxable business income | 3,12,000 |
Under the FY 2082/83 slabs, the first Rs 5 lakh of an individual's income carries only the 1% social security tax, and the PKF tax card notes registered sole proprietors are not charged that 1% at all. This rider's entire profit sits inside that first band: income tax due, effectively zero. From FY 2083/84 the first band stretches to Rs 10 lakh at 1%, so the conclusion holds with even more room. And the waiver survives the new structure: ICAN's analysis of the 2083/84 budget quotes the new schedule's proviso keeping the 1% off pension income, SSF contributors, and the income of sole proprietorship firms.
Meanwhile, from Shrawan the platform withholds 1% advance tax regardless. If the base turns out to be the net payout (fares minus commission, Rs 4,80,000 here), that is Rs 4,800 withheld against a final liability of roughly zero. Advance tax is adjustable, so the excess is claimable, but only by someone who registers and files. The withholding quietly converts filing from a legal nicety into the way you get your own money back.
One more comparison worth running: a rider earning a bit less, say Rs 40,000 a month gross, would clear under Rs 3 lakh in net income and could instead elect the flat D-01 small-taxpayer amount, Rs 7,500 in Kathmandu. In this income range the flat tax costs more than the slab math, which is worth knowing before an agent talks you into the "simple" option. The full comparison of the three small-business regimes is in the turnover tax vs regular tax post.
Registering: the PAN, and the SSF question
Getting a personal PAN costs nothing. Apply at the IRD taxpayer portal or through the Nagarik App with your citizenship certificate and a photo; issuance typically runs one to three working days. Pathao's own published rider requirements list a national ID, driving licence and bluebook (insurance is mandatory for cars, optional for bikes), with no PAN demanded at sign-up, which is exactly why so few riders have one. Getting it before the withholding starts means the 1% remitted against your name is creditable to you rather than orphaned. The PAN basics post covers the mechanics.
Registration also opens the door to the Social Security Fund. A rider is self-employed labour with no employer contribution, no gratuity and no accident cover beyond what the platform offers (inDrive advertises up to Rs 8 lakh death and disability cover; Yango Rs 10 lakh, per the April 2026 Kathmandu Post report). SSF's informal-sector and self-employed schemes exist for exactly this shape of work: the informal-sector scheme has the worker pay 11% of a reference salary with a local-government top-up, while the self-employed scheme takes the full 31% of a declared base. The contribution bands have been revised since launch, so confirm current figures at ssf.gov.np before enrolling. What the 31% buys, medical cover through pension, is laid out in the SSF for freelancers post.
If you never register anything
The penalty menu is modest on paper: Section 117 as the current PKF card reads it charges the higher of 0.1% of assessable income a year, Rs 1,200 per return, or Rs 100 a month for an unfiled return, and Section 119 stacks 15% interest on unpaid tax; the late-filing post walks the fee math. For a rider whose liability is near zero, the exposure is small in rupees, and enforcement has so far aimed at the platforms rather than at riders.
The exposure that grows is the record. Once the platform remits 1% under your name every payout cycle, the IRD holds a ledger of your earnings going back years, and non-filers with visible income histories are the easiest enforcement targets a tax office ever gets. The cheap move is to register while the number on file is still small.
What you actually need to know
- Your income was always taxable; the likely bill is small. A full-time bike rider's net profit sits in the lowest band, near zero tax through FY 2082/83 and at most 1% under the new Rs 10 lakh floor. Car and taxi owners on the platforms should check the Schedule 1(13) flat tax first, Rs 5,500 to 9,000 a year, final, no return.
- Shrawan 1, 2083 is the real deadline. From 17 July 2026 the platform withholds 1% advance tax from payouts and collects 5% VAT on rides. The withholding is claimable against your final bill, but only if you have a PAN and file. Unregistered riders donate it.
- Keep the receipts. Commission, fuel, servicing, depreciation at 20% WDV: on actual books these deductions routinely erase most of the taxable profit. The records cost you a shoebox; skipping them costs you the deductions.
This post is part of the Nepal Money Basics guide, in the earn-more section next to the freelance and side income tax post.
Riding full-time and unsure which regime fits your numbers? Email the rough monthly figures (no PII) to parjanya57@gmail.com.
Frequently asked questions
- Do Pathao and InDrive riders have to pay income tax in Nepal?
- Yes. Rider earnings are business income of a natural person under the Income Tax Act 2058, which carries registration and filing obligations, though enforcement so far has aimed at the platforms rather than individual riders. In practice the amount owed is often small: a full-time bike rider netting around Rs 3 to 4 lakh a year (the shape of the worked example in the post) sits almost entirely inside the lowest slab, and from FY 2083/84 the first Rs 10 lakh of individual income is taxed at just 1%, a band that registered sole proprietors have historically not been charged at all.
- Does Pathao or InDrive deduct tax from rider earnings?
- Not through FY 2082/83, no rider-specific withholding existed. That changes on Shrawan 1, 2083 (17 July 2026): the Finance Bill 2083 adds a new sub-section to Section 95A of the Income Tax Act, requiring ride-sharing platforms to collect 1% advance tax on payments to natural persons providing services through the platform. The bill does not yet spell out whether the 1% applies to the full fare, gross earnings, or the net payout after commission; an IRD circular will have to settle that.
- What is the presumptive vehicle tax, and can a bike rider use it?
- Schedule 1(13) of the Income Tax Act lets the owner of a vehicle on hire pay one flat annual tax at bluebook renewal, and for a natural person whose only income is from the hired vehicle, that payment is final, with no return to file. FY 2082/83 rates run Rs 5,500 to Rs 9,000 for cars, jeeps and vans by engine size, and Rs 3,000 to Rs 7,500 for EVs by kilowatt. Two-wheelers are absent from the current list, so bike riders cannot use it yet. The Finance Bill 2083 fixes that from FY 2083/84: the amended schedule as reproduced by ICAN prints Rs 3,000 a year for a two-wheeler and Rs 3,500 for an e-rickshaw, with the car lines stepping up to Rs 6,500 through Rs 11,000.
- What expenses can a rider deduct?
- If you register and file on actual accounts, Section 13 of the Income Tax Act allows expenses incurred in earning the business income: fuel, servicing and repairs, the platform's commission, and a share of phone and data costs. The vehicle itself depreciates in Pool C at 20% written-down value per year under Schedule 2. Keep the records; a deduction without documentation is just a number the tax office can refuse.
- Will the new 5% VAT on ride-sharing come out of rider earnings?
- The 5% VAT that takes effect on Shrawan 1, 2083 is charged on the taxable value of rides and collected by the platform, so legally it is a tax on the service, added to what the passenger pays, rather than a deduction from the rider. inDrive's policy head has publicly framed the trade-off: pass the VAT to passengers and fares rise; absorb it and investment slows. Either way, a platform holding fares flat to stay competitive can end up taking the cost out of the rider's side of the split, so watch your per-ride payout in the first weeks of Shrawan.
- What happens if a rider never registers or files anything?
- Section 117 of the Income Tax Act charges the higher of 0.1% of assessable income per year, Rs 1,200 per return, or Rs 100 per month for an unfiled return, and Section 119 adds 15% annual interest on unpaid tax. Enforcement against individual riders has been thin so far, but the 1% platform withholding changes the game: from Shrawan 2083 the IRD receives a record of every rider's payouts, which makes staying invisible much harder than it used to be.