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Nepal Investment Income Guide

Investment income in Nepal is subject to withholding tax (WHT) at source. Dividends are taxed at a final 10% WHT. Interest income varies: 5% on savings accounts and 15% on fixed deposits. Capital gains on shares are taxed separately at 5-10%. Most investment income is subject to final withholding, meaning no further tax return filing is needed. All amounts in NPR.

Investment income in Nepal is generally taxed through a final withholding tax (WHT) system — the tax deducted at source is the final tax liability for the investor, and no further tax return or self-assessment is required (except in certain cases where the investor's marginal rate exceeds the WHT rate). The system is administered by the Inland Revenue Department (IRD). For related guidance, see our Capital Gains Guide →, Personal Tax Guide →, and Crypto Tax Guide →.

Dividend Taxation

  • Dividend WHT — 10%: Dividends paid by Nepali companies to shareholders are subject to a 10% WHT. This is a final tax for resident individual shareholders — the dividend is not included in their taxable income for IIT purposes.
  • Cash and stock dividends: Both cash dividends and bonus shares (stock dividends) are subject to the 10% WHT. For bonus shares, the tax is typically paid by the company on behalf of shareholders or withheld when the bonus shares are issued.
  • Corporate shareholders: Dividends received by Nepali companies are generally exempt from tax under the participation exemption (similar to fritaksmetoden) — the dividend is not taxed but 3% may be treated as non-deductible expense. Foreign corporate shareholders may be subject to the 10% WHT, reduced under applicable Double Taxation Treaties (DTTs).
  • Dividend from foreign companies: Dividends received from foreign companies are taxable in Nepal at normal IIT rates, with a foreign tax credit available for WHT paid abroad (subject to DTT limits).

Interest Income Taxation

  • Savings account interest — 5%: Interest earned on savings accounts with banks and financial institutions is taxed at a 5% WHT (final). This applies to all savings deposits held in licensed Nepali banks.
  • Fixed deposit interest — 15%: Interest on fixed deposits (FDs), term deposits, and debentures is taxed at 15% WHT (final). The bank deducts the tax before crediting the interest to the depositor's account.
  • Other interest: Interest on government bonds, corporate bonds, and other debt instruments is generally taxed at 15%. Interest paid to non-residents may be subject to a different rate under DTT provisions (typically 10-15%).
  • Final vs. non-final: For most resident individuals, the WHT on interest is final — no further tax is due. However, if the individual's marginal IIT rate exceeds the WHT rate, they may elect to include the interest in their taxable income and claim credit for the WHT (this is beneficial for low-income earners whose effective rate is below the WHT rate).

Other Investment Income

  • Royalties — 15%: Income from royalties (intellectual property, patents, copyrights, trademarks) is subject to 15% WHT. For non-residents, the rate may be reduced under DTTs.
  • Mutual funds and unit trusts: Distributions from mutual funds are generally treated as dividends (10% WHT) or interest (5-15% WHT) depending on the fund's underlying investments. Capital gains on the sale of mutual fund units are treated similarly to share capital gains.
  • Capital gains on shares: Gains from the sale of listed shares are taxed separately at 5% (long-term, over 1 year) or 10% (short-term, under 1 year). See our Capital Gains Guide → for details.

For cross-border investment income and DTT benefits, see our Cross-Border Guide →. For real estate investment, see our Property Tax Guide →.