New tax measures come into effect as new fiscal year begins

The government has begun enforcing a series of new tax measures with the start of the new fiscal year 2026/27, bringing significant changes to taxation on electricity, education, healthcare, ride-sharing services, personal income, and capital gains from shares and real estate.

The measures, introduced through the national budget unveiled on May 29, officially came into effect from July 17 (Shrawan 1) under the Economic Act 2083.

VAT introduced on electricity consumption

For the first time, household electricity users consuming more than 50 units per month will be required to pay 5% Value Added Tax (VAT) on the electricity consumed beyond the 50-unit threshold. Households using 50 units or less remain exempt from VAT.

With the introduction of the 5% VAT, Nepal now enters into a multi-rate VAT system.

Commercial, industrial, and institutional consumers, however, will pay the full 13% VAT on their electricity bills, with no exemption.

Electricity transactions between electricity businesses, such as hydropower developers selling power to the Nepal Electricity Authority (NEA), will remain exempt from VAT under business-to-business (B2B) provisions.

Education and healthcare services face new equity levy

The government has imposed a 3% Equity Fee on services provided by private educational institutions and private healthcare providers.

Students enrolled in private schools, colleges, and universities will pay the additional charge on tuition and other institutional fees. Similarly, patients receiving treatment at private hospitals and diagnostic laboratories will pay the 3% fee on their bills.

The levy applies only to payments made directly by students and patients and does not cover business-to-business transactions between institutions.

Ride-sharing services taxed

Ride-sharing services are also subject to new taxation.

Passengers using ride-sharing platforms will now pay 5% VAT on ride fares, while ride-sharing companies will continue paying 13% VAT on the commission or service fees they charge drivers.

Drivers are also required to register for a Permanent Account Number (PAN) under the new tax rules.

Capital gains tax increased

The government has raised capital gains tax (CGT) on both share and real estate transactions.

Under the revised rates:

Shares held for less than one year will be taxed at 10%, up from 7.5%.

Shares held for more than one year will attract 7.5% CGT, up from 5%.

The budget also states that capital gains tax deducted from share transactions will be treated as a final tax, although the wording of the Economic Act has generated debate among investors over the legal interpretation of this provision.

Real estate transactions are also subject to higher CGT:

• Property owned for less than five years will be taxed at 10%.
• Property held for five years or more will now be taxed at 7.5%.

Personal income tax structure revised

The government has also introduced a new personal income tax regime aimed at reducing the tax burden on salaried individuals.

The lowest tax threshold has been doubled from Rs 500,000 to NRs one million, with annual taxable income up to NRs one million now taxed at 1%.

The revised tax slabs are:

• Up to NRs one million: 1%
• NRs one million–1.5 million: 10%
• NRs 1.5 million–2.5 million: 20%
• NRs 2.5 million–4 million: 27%
• Above NRs 4 million: 29%, including a two percentage-point surcharge

The new system reduces the number of tax brackets from six to five and lowers the highest effective tax rate from 39% to 29%.

Alongside these measures, revised customs duties, excise taxes, green taxes, and infrastructure investment charges introduced in the national budget have also begun taking effect.

New customs charges replace selected excise duties

The government has also introduced two new customs-related charges, replacing excise duties on several categories of goods as part of its efforts to promote domestic production and finance infrastructure development.

The Domestic Production Promotion and Protection Charge (DPPF) has been introduced on agricultural products, dairy items, and selected household goods after the removal of existing excise duties. In several cases, the new charge is higher than the previous excise rate, increasing the tax burden on certain products.

The government has also introduced the Clean Infrastructure Investment Charge, replacing excise duties on electric vehicles. While some electric vehicles will now face higher charges compared to the previous excise structure, the new levy has also been extended to selected consumer goods, including televisions, mobile phones, refrigerators, and washing machines.

Luxury charge removed from gold and silver

The government has removed the existing luxury charge on gold and silver transactions and introduced a new 0.5% Skills Promotion Charge.

The new levy is intended to generate resources for skill development, training, and capacity-building initiatives in the gold and silver sector.

However, the existing 2% luxury charge on five-star hotels and imported alcoholic beverages remains unchanged.

The implementation of the new tax regime is expected to affect millions of consumers, businesses, investors, and taxpayers across the country as the government seeks to strengthen revenue collection while reshaping the country's tax system.