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Rental tax means a tax that a person or an organisation has to pay to the government upon the income earned renting a house, land or any structure owned by them for a certain period of time. After the formation of the local government in Nepal, the right to collect rental tax was given to the local level. After the local government started to collect the rental tax, it has been the primary source of revenue for them. Thus, the collection of tax on rent has been strict. Due to the lack of basic information about these taxes, many people have to pay a fine. Therefore, we will discuss some basic things related to house rent tax in this article.
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1. Who should pay Rental tax in Nepal?
The provision of tax on rental income is determined in the Rental agreement. Except as otherwise decided in the rental agreement, it shall be the obligation of the owner to pay the tax. But in the rental agreement between owner and tenant, if it is said that the tenant will pay the rental tax, then the tenant must pay it.
According to National Civil (Code) Act, 2074, Section-392 , if it is the obligation of the owner to pay tax but fails to pay in time then the tenant must pay such tax. In doing so, the tenant shall be entitled to deduct tax amount from the rent payable to the owner. -
2. How much Rental Tax should be paid in Nepal?
After the constitution of Nepal gave the authority of rental tax collection to the local level, the different local level governments have set different tax rates. Until 2074, 10 percent house rental tax had to be paid to the central government. At present, the local level is collecting Rent tax ranging from 10 to 17 percent of rent amount. Kathmandu Metropolitan City has been charging 10 percent house rent tax.
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3. Where should Rental Tax be paid in Nepal?
Due to the fact that the constitution of Nepal has given the right of rental tax collection to the local level governments, Rental tax should be paid to the respective ward offices. Before 2074, the house owner had to go to the nearest Inland Revenue Department to pay the tax. But if an organisation or company has rented out its property, the tax on the income should still be paid to the central government.
It is not necessary to pay rental tax in advance. The tax must be paid by the end of the running fiscal year. If we don’t pay tax, then we may be fined 10%.
Source:
Ministry of Federal Affairs & General Administration
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