Nepal Rental Income Guide

Rental Income Taxation

• Taxed at IIT rates: Net rental income (gross rent minus allowable deductions) is added to the owner's total income and taxed at the progressive IIT rates of 1% to 36%, after the NPR 500,000 personal relief.
• House rent tax — 10%: An additional 10% house rent tax is levied on rental income from residential properties. This is a separate tax on gross rental income (before deductions) for properties let out for residential purposes. Commercial property rentals are not subject to the additional 10% tax but are taxed at normal IIT rates.
• Scope: The 10% house rent tax applies to landlords who let out residential houses or apartments. The tax is calculated on the contractual rent or the government-fixed minimum rent, whichever is higher.

Allowable Deductions

• Standard deduction — 10% of gross rent: A blanket deduction of 10% of gross rental income is allowed for maintenance and repair costs without requiring supporting documentation. This is the simplest method for most landlords.
• Itemised deductions: Alternatively, landlords may claim actual expenses with proper documentation: municipal taxes paid, land revenue tax, property insurance premiums, mortgage interest on loans used to acquire/improve the property, repairs and maintenance, management fees, and depreciation on the building (but not land).
• Interest deduction: Interest on loans taken for the construction, purchase, or renovation of the rental property is deductible. If the loan is used partly for personal purposes, only the business-related portion is deductible.
• Loss relief: If allowable deductions exceed rental income, the loss can be set off against other income in the same year. Unabsorbed losses can be carried forward for up to 7 years.

Filing and Compliance

• PAN requirement: Landlords receiving rental income must have a Permanent Account Number (PAN) and include rental income in their annual tax return.
• Withholding tax: Tenants who are businesses or registered entities must withhold 10% WHT on rent payments (under Section 88 of the Income Tax Act) and remit it to the IRD. Individual tenants renting for personal use are generally not required to withhold.
• Declaration: Rental income is declared in the annual tax return filed by mid-October. Landlords must maintain records of rent receipts, expense invoices, and loan statements.
• Advance tax: If rental income is significant, the taxpayer may be required to pay advance tax quarterly based on estimated total income.

For property transfer tax and CGT on property sales, see our Property Tax Guide → and Capital Gains Guide →.