1. Which organizations are tax exempted?
The following organizations are exempted from tax:
- A social, religious, educational or benevolent organization of public nature established with non-profit motive having received the certificate of organization enjoying tax exemption from Inland Revenue Department.
- An amateur sports organization so formed with a view to promoting social or sports related facilities that the organization or its members does not derive profits, motive having received the certificate of organization enjoying tax exemption from Inland Revenue Department.
- A political party registered in the Election Commission,
- Village Development Committee, Municipality or District Development Committee,
- Nepal Rastra Bank,
- Government of Nepal.
2. Does every income of the tax exempted organization get tax exemption?
The tax exemption shall only be granted in the income received by such organization like gift, donation, grant, subscription fee or amount of aid received from any governmental or non-governmental (national or foreign) in discharging functions in consonance with the objective of the organization.
Tax exemption shall not be granted in cases where any person has derived any benefit from the property of that organization and the monies obtained from that organization by doing any business or investment.
3. What are the amounts received by tax exempted office which are granted tax exemption?
The tax exemption shall be granted in the income received by such organization like gift, donation, grant, subscription fee or amount of aid received from any governmental or non-governmental (national or foreign) in discharging functions in consonance with the objective of the organization.
4. What shall be done in order to get certificate of tax exemption?
To obtain the certificate of tax exemption any organization that fall under the category of tax exempted organization under Income Tax Act, 2058 shall make application to any office under Inland Revenue Department.
5. What shall be mentioned in such application. What are the documents that are to be submitted along with the application?
While submitting the application, the following matters shall be mentioned in it:s
- Name, Address of the organization,
- Permanent Account Number (PAN)
- Registration Number,
- Objective of the Organization,
- Place of carrying out is activities,
- Name, Post, Address of the head of the organization,
- Source of income of the organization.
The following documents shall be submitted along with the application:
- A duplicate copy of the registration certificate,
- Statute of the organization,
- Copy of certificate of permission if permission from any other office has to be taken,
- Where the permanent account number has been obtained, a copy of such certificate,
- A duplicate copy of an audit report,
6. Is it necessary for tax exempted organization to be registered in Inland Revenue Department? Does such certificate of registration need renewal annually?
The tax exempted organization shall Permanent Account Number from offices under Inland Revenue Department. The certificate of registration shall be renewed every year within three months of the end of the fiscal year.
Similarly, the details of the tax withholdings and tax amount shall be paid. If any taxable transaction has been done, income returns, and tax amount shall be paid within three months of the end of the fiscal year.
7. Fee to be submitted along with the application.
Fee need no to be paid along with the application.
8. Are the tax exempted organization to submit income returns annually?
The tax exempted organizations shall compulsorily audit and submit financial statement annually within end of the Ashwin. If the statements are not submitted within the time limit, fine shall be imposed. While deciding the amount of fine, the amount which is greater whether the amount calculated at the rate of 0.1% of the income or amount calculated by Rs. 100 each month will be imposed. However, if such organization has earned income besides the income having exemption, the details of installment, annual financial statement and tax has to be submitted at the specified time.
9. Is it true that the tax exempted organization has to submit its financial statement to Inland Revenue office Annually?
Yes, it is true that the tax exempted organization has to submit its financial statement to Inland Revenue office Annually within three months of end of the fiscal year.
10. Do tax exempted organizations need to withhold tax at the time of making payment like salary, house rent and make payment of such tax withholdings?
The tax exempted organizations need to be registered in PAN and obtain PAN and it needs to withhold tax in very payments like salary, house rent, payment of contracts, at the rate as specified by Income Tax Act. Such organization shall pay to the concerned Inland Revenue offices along with the statement mentioning payment subject to tax withholding, name address of the person subject to tax withholding and the permanent account number, amount of tax withheld within 15 days f expiration of each month. Failure to make payment within such time limit shall lead to fine.
11. Do tax exempted organization need to have PAN or not?
Such organization need to obtain PAN before they make application to obtain certificate of tax exemption.
12. Can tax exempted organization engage in competitive business?
Yes, such tax exempted organization can be engaged in business transaction in competitive manner like service contract. Since, such transactions are taxable, the income earned through such transaction shall be taxable and tax has to be paid as per the Income Act.
13. Which office shall be consulted to have proof of tax exempted office?
To get permission as to commence organization as being tax exempted organization, the office under the Inland Revenue Department from where it has obtained PAN.
14. Who shall give application to obtain certificate of tax exemption?’
The head of the organization or the representative of the organization shall give such application.
15. Is there a facility to obtain certificate of tax exemption without going to the concerned offices?
The application to be submitted could be downloaded from the website, www.ird.gv.np. However, the application has to be submitted in the office under Inland Revenue Department from where the organization obtained PAN.
16. Who is to be consulted for more information about tax exemption?
Those organization that want tax exemption and need more information regarding it, they can consult with Inland Revenue Department or Inland Revenue Office or department of taxpayer service in office of taxpayer service or help desk of such officeso
17. Does tax exempted office need to renew their certificate of tax exemption every year?
The tax exempted organization need to renew their certificate of tax exemption within three months of expiration of fiscal year. For renewal, the organization need to submit
Application in the specified manner, audit report of the previous year and details of the tax withholdings. If the tax office finds that tax exemption should be given to the organization renewal f such certificate is done.