Budget And Tax For The Fiscal Year 2078/79

June 16, 2021 | Mukunda Tripathee

Budget For FY 2078/79

As per the constitutional provision, government announced budget for the fiscal year 2078/79 on 15^th Jestha-2078 BS through the ordinance. The size of budget for FY 2078/79 is 1,647.57 billion rupees, whereas last year’s budget was 1,474.64 billion rupees. The sources of fund for the budget are revenues, foreign grants, and loans and borrowings of Rs 1024.90, Rs 63.38, and Rs 559.29 billion respectively. As per target of budget, expected economic growth and inflation rate would have been 6.50 percent.

Major Announcements & Highlights Of The Budget

Nation is badly affected by COVID-19, so government has given the priority to revive the economic development through the budget. Thus, the budget has emphasized on the rapid control, prevention, and cure of COVID-19 through free vaccination, mobilization and development of medical resources and infrastructures as and when required.

Uplifting economic activities, providing different kind of subsidies, incentives, and relief package to the affected families from COVID-19, coordination and cooperation between Federal, Provincial and Local level structures, maintaining social security and protection based life cycle of Nepalese people, ending all types of discrimination and inequality, assurance of job and employment opportunities are major priorities of budget.

Ministry-wise, 10.93 percent of the total budget i.e. Rs 180,04 billion is allocated to Ministry of Education, Science and technology which is highest budget among the ministries. Similarly, least budget of Rs 1.20 billion or 0.07 percent is allocated to Ministry of Women, Children and Senior Citizen.

Similarly, free COVID-19 vaccines, 20 percent waiver on feeding materials during the prohibitory period, water and electricity charge waive based on the consumption limit/units, priorities for startup business by tax exemption for 5 years, laptop facility for students at 1 percent interest, educational certificate collateral based loan up to 2.5 million, issuance of national identity card, water export from Himalayan region, digital land registration and transfer system, increment of salary by Rs 2,000 of Civil servant, senior citizen allowance increased by Rs. 1,000, constructions of parks and children’s paradise, continuation of Prime Minister Employment program, increment of social security allowance by 33 percent, free visa for tourist for a month etc. are the major highlights of budget 2078/79.

Major Amendment in Income Tax

Private building means building, the land occupied by the building and additional land equivalent to area of land occupied by building or one Ropani of land whichever is lesser.
Through budget, income tax threshold of income from business is changed from two lakh to three lakh and business turnover is increased from two million to three million.
ITA-2058, section-3(ka), the threshold limit is increased from 2 million to 3 million and less than 5 million to less than 1 crore and taxable income from business is 1 million.
Income tax to Mutual fund and educational institute established with objective for nonprofit as per agreement with GON is exempt from income tax.
50% tax is exempted on income earned by agricultural firm, company, partnership firm and other entities
Production based industries can enjoy additional 10% tax exemption on income earned by export of goods
Special industries established and operated on special region shall get 50% tax exemption for first 3 years and 25% for next 5 years
Domestic industry produce raw material and subsidiary raw material get 20% tax exemptions on income earned form the selling to special industries.
Startup business as prescribed by government established by utilizing innovative knowledge, concept, skill, technology, having annual transaction up to 1 crore would enjoy 100% tax exemption.
If Special industry shift from Kathmandu valley to outside would enjoy 100% tax exemption up to 3 years and 50% tax exemption for additional 2 years.
If an industry establish and produce new product by utilizing only used materials that directly impact for environment degradation as raw materials would enjoy 50% tax exemption up to 3 years and 25% tax exemption for additional 2 years.
5% TDS shall be deducted on payment of carriage services and vehicle provided in rent whether registered in VAT or not.
5% TDS shall be deducted on the payments to foreign institutions for registration fee, education fee, and exam fee.
10% TDS shall be deducted on interest payment by Domestic BFIs to foreign BFIs on loan received from BFIs to invest in the area specify by NRB.
5% advance tax would be deducted in case of disposal of securities listed in NEPSE after 365 days, whereas 7.5 % advance tax would have been deducted from the disposal of securities within 365 days.
1% tax shall deduct on payment received against the software or similar electronic service provided outside Nepal.
100% of undisputed tax and 50% of disputed tax, charges and interest shall be provided as deposit or bank guarantee to make appeal in Revenue Tribunal.
In case of resident natural person having pension income 25% of the exemption limit shall be deducted while calculating taxable income.

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Special Relaxation On Tax To The Person Affected By COVID-19

90% tax exemption in applicable tax if taxpayers having annual turnover of 20 lakh and having income of Rs. 2 lakh. Similarly, taxpayers having transaction from 20 lakh to 50 lakh would get 75% tax exemption on applicable tax. Likewise, having business transaction up to 1 crore shall be provided 50% tax exemption on applicable tax.
1% tax shall be charged for F/Y 2077/78 to Hotel and Travel, Film business (production, distribution and screening), party palace, media house, transportation and aviation house having business transaction above 1 crore, in case of loss, carry forward period is extended by 3 years.
Amount contributed for Corona prevention, control and treatment fund established by Federal, Provincial and Local level government can be deducted from taxable income for FY 2077/78.
Import, production, and distribution of various medical equipment for the treatment of patients infected by COVID-19 is exempted custom duty, excise duty and VAT until 2078 poush end.
Additional expenditures other than corporate social responsibility in the management of equipment, other materials, COVID-19 specialized hospital as prescribed by MOHP shall be allowed for deduction for FY 2077/78.

(Mr. Mukunda Tripathee is a Banker.)

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