Section 24: Exemptions, facilities or concessions relating to Income Tax

1)An industry registered under this Act is entitled to the exemptions, facilities or concessions under the prevailing laws.

2) Without prejudice to the generality of sub-section (1), the following exemptions, facilities or concessions are provided to the industries:

(a) the manufacturing industry is entitled to a twenty percent exemption on the rate of tax leviable on the income earned by it and to an exemption from income tax by an additional five percent of the rate of tax leviable on the income earned by it by exporting its products,

(b) an infrastructure industry, such as road, bridge, tunnel, ropeway, railway, tram, trolley bus, airport, industrial structure and infrastructure complex, is entitled to a forty percent exemption on the rate of tax leviable on the income earned from investment if any, in, and operation of, the industry,

(c) a manufacturing industry, other than an industry producing fruit-based brandy, cider, or wine, established in the least developed, underdeveloped and less developed regions mentioned in Schedule-10 is entitled to respectively ninety, eighty and seventy percent exemption on the rate of income tax leviable under the prevailing law for up to ten years from the date of commencement of commercial production or transaction of such industry,

(d) an industry producing fruit-based brandy, cider, or wine established in the least developed and underdeveloped regions is entitled to respectively forty and twenty-five percent income tax exemption for up to ten years from the date of commencement of its transaction,

(e) a manufacturing industry producing and processing local tea products, dairy industries dealing in milk products and industries manufacturing textiles is entitled to a fifty percent exemption on the rate of income tax leviable on the income earned by it from the sale of its products,

(f) twenty-five percent exemption on the rate of income tax leviable on royalty income earned by any person from exporting an intellectual property right,

(g) fifty percent exemption on the rate of income tax leviable on the income earned by any person from selling by way of transfer of an intellectual property right,

(h) a manufacturing industry established with an investment of more than one billion rupees and providing direct employment to more than five hundred individuals throughout the year is entitled to a hundred percent income tax exemption for the first five years from the date of commencement of transaction and fifty percent exemption on the income tax for next three years;

Provided that a manufacturing industry currently in operation is entitled to a hundred percent income tax exemption on the income earned from such capacity enhancement for first five years and fifty percent exemption on the income tax for the next three years if such industry enhances its installed capacity by at least twenty-five percent, increases investment to two billion rupees and provides direct employment to more than three hundred individuals throughout the year.

(i) A licensee person or body commencing the commercial generation, transmission or distribution of hydropower not later than the month of Chaitra 2080 (mid-April 2024) or project generating electricity from solar, wind and bio substance is entitled to a hundred percent income tax exemption for first ten years and fifty percent income tax exemption for next five years,

Provided that the provisions in force at the time of granting the license apply to the licensee person having commenced its commercial production at the time of commencement of this Act.

(j) a person exploring and excavating mines (except limestone), petroleum products, natural gas and fuel is entitled to a hundred percent income tax exemption for the first seven years after the date of commencement of commercial transaction and to fifty percent income tax exemption for the an a next three years if the person commences such transaction not later than the month of Chaitra 2080 (mid-April 2024),

(k) an industry related to tourism established with the investment of more than two billion rupees is entitled to hundred percent income tax exemption for first five years after the date of commencement of transaction and to fifty percent income tax exemption for next three years,

(l) such industry related to the operation of a zoological, geological, bio-tech park, and software development, data processing, cyber-café and digital mapping established inside a technology park and information technology park as specified by the Government of Nepal by publishing a notice in the Nepal Gazette is entitled to fifty percent income tax exemption,

(m) the following industries providing employment to the following number of Nepali citizens are entitled to the following exemptions, facilities:

(1) a manufacturing industry and information technology industry providing direct employment to three hundred or more Nepali citizens  throughout the year is entitled to fifteen percent of tax leviable on the income of that year,

(2) a manufacturing industry and information technology industry providing direct employment to one thousand two hundred or more Nepali citizens throughout the year is entitled to twenty-five percent of tax leviable on the income of that year,

(3) such industry is entitled to additional fifteen percent of tax leviable on the income of that year if at least fifty percent of the Nepali citizens employed under clause (1) or (2) are women, Dalit or persons with disabilities.

(n) an industry is entitled to deduction, for the purposes of income tax, of expenses made in long-term interest or welfare activities for its labours and employees, such as life insurance, health facilities, contributory social security, education and training, child care centre and sports and exercise for physical fitness,

(o) a manufacturing industry is entitled to deduction, for the purpose of calculating income tax, of maintenance expenses, training expenses paid to such trainee workers if at least ten percent of its total strength of human resources are trainee workers, and of expenses incurred in development of production capacity of human resources in the  industry,

(p) an industry is entitled to deduction of expenses for the same year up to fifty percent of the adjusted taxable income of the industry business out of the expenses incurred in the systems and equipment preventing and controlling pollution or causing minimum effects on the environment by recycling or reusing waste materials, and to making depreciation by capitalizing the expenses exceeding the ceiling of adjusted taxable income of such industry business in the beginning of the next income year,

(q) an industry is entitled to deduction for the purpose of income tax of all expenses invested in machinery or equipment contributing to reducing consumption of energy by enhancing energy efficiency,

(r) an industry is entitled to deduction of expenses up to fifty percent of the adjusted taxable income of all industry business operated by that person out of the expenses incurred in the enhancement of entrepreneurship, research and development and creation of new technology for enhancing productivity of the industry, and to making depreciation by capitalizing the expenses exceeding the ceiling of adjusted taxable income in the beginning of the next income year,

(s) an industry is entitled to deduction for the purpose of income tax of the expenses not exceeding the prescribed ceiling incurred in market promotion, survey and advertisement related to the industry business,

(t) an industry is entitled to deduction for the purpose of income tax of such expenses as prescribed incurred for the protection of physical property of the industry and expenses for net payment of premium for insurance thereof,

(u) an industry is entitled to deduction for the purpose of income tax of the expenses incurred by it in the protection in Nepal of an industrial property under an intellectual property right registered in Nepal,

(v) an industry is entitled to deduction for the purpose of income tax of the fees paid for the registration in a foreign country of an intellectual property right acquired by it for the protection of such right,

(w) an industry is entitled to reduction of one hundred thousand rupees or five percent of the adjusted taxable income of the industry for that income year, whichever is less, out of the amount donated or gifted by the industry to an entity enjoying tax exemption,

(x) an industry is entitled to deduction in whole or in part, for the purpose of assessment of income, of the amount spent or donated by it for any such act as may be specified by the Government of Nepal in any specific situation, by publishing a notice in the Nepal Gazette.

3) Notwithstanding anything contained in sub-section (2), a tobacco industry and a liquor industry, other than an industry mentioned in clause (d) of that sub-section, are not entitled to any of the said exemptions and facilities.

Provided that such industry is entitled to deduction of actual expenses made for business promotion, including the expenses made in long-term interest or welfare activities of its labours and employees under the prevailing law, expenses invested in the systems and equipment preventing and controlling pollution, re-processing waste materials and causing minimum effects on the environment, expenses invested in machinery, equipment contributing to reducing energy consumption by enhancing energy efficiency, and expenses incurred in research and development.

4) An industry which may enjoy more than one exemption under this Section with respect to the same income is entitled to only one exemption that it chooses.

5) An industry other than the tobacco industry, alcohol industry and casino, is entitled to hundred percent exemption on dividend tax leviable on such capitalization against the distribution of dividends if the industry capitalizes its accumulated profit in shares for the expansion of the same industry or another manufacturing, energy-oriented or agriculture and forest product based industry.

6) A cottage industry and small industry which are in operation upon registration at the time of the commencement of this Act and which come in operation upon registration under this Act with the fixed capital of less than ten million rupees are entitled to fifty percent exemption on income tax leviable on them.