Quick Answer (TL;DR)

If you have business or investment assessable income in the income year, pay advance tax in 3 installments under Sec 94 of Income Tax Act 2058: 40% by Poush end (~mid-Jan), 70% cumulative by Chaitra end (~mid-Apr), 100% by Ashad end (~mid-Jul). Each installment is computed from the estimate/revised estimate for that period less already-paid installments + TDS credits to date + deemed withholding + Sec 51 medical credit (see Act text for the exact factor). Shortfall from the required coverage of actual liability attracts interest under the Act's interest provisions.

Employment-only? No installments — your employer withholds monthly per the slab. Advance tax is for business/investment income.

Who Must Pay Advance Tax?

  • Must pay: any person who has or will have assessable income from business or investment in the income year (Sec 94(1)) — companies, firms, freelancers, professionals with business income, rental businesses etc.
  • Not required if: the installment amount is below the statutory floor in Sec 94(2) (commonly cited as Rs 2,000 per installment — verify the current Act text on lawcommission.gov.np). Note: an Rs 7,500 annual figure circulates in guides but is not the statutory test — apply only the Sec 94(2) floor unless a current IRD notice says otherwise
  • Employment-only: handled via employer TDS; annual return filing may still be needed per Sec 95/96 rules
  • Transaction-based (presumptive) taxpayers: commonly cited Sec 94(11A) 2-installment track (verify current numbering — see below)

The 3 Installments (Sec 94)

By end of Poush (~mid-Jan)40% of estimated tax
By end of Chaitra (~mid-Apr)70% of estimated tax (cumulative)
By end of Ashad (~mid-Jul)100% of estimated tax (cumulative)

Fiscal year in Nepal runs Shrawan 1 to Ashad end (~16 Jul to 15 Jul); month-ends above are Nepali calendar dates for that FY.

How Each Installment Is Calculated

At each date, compute (see Sec 94 text for the exact statutory factor — commonly applied as 90%):

Installment = 90% × Estimated (or Revised) Tax for the year − (Already-paid installments + TDS credits to that date + Deemed withholding under Sec 90(3) + Sec 51 medical credit to that date)

“Already-paid” counts everything in the same income year before the installment date (Sec 94 definition). If 70% cumulative was already covered by the first installment + TDS, the second installment may be nil. Confirm the 90% factor against the current Act text on lawcommission.gov.np.

Revised Estimate (Sec 95)

If business conditions change, file a revised estimate under Sec 95 before the next installment date. All later installments recalculate from the revised figure. Always revise down (or up) honestly — understating the estimate still leaves you liable for interest on the shortfall against the required share of actual final tax under the interest provisions of the Act.

Transaction-Based Taxpayers — 2 Installments

By Poush endTax at prescribed rate on actual transactions up to 20 Poush (~4 Jan)
By Ashad endTax on estimated full-year transactions based on actuals to 20 Ashad (~4 Jul) — less the first payment

How to Pay & File

  1. Estimate the year’s tax (or transaction base) honestly before each date.
  2. Log in to taxpayerportal.ird.gov.np → Advance/Installment Tax → select FY and installment.
  3. Pay via connectIPS / eSewa / IRD revenue and keep the voucher/receipt.
  4. File the estimate/revised estimate where the portal asks (Sec 95).
  5. Keep the e-payment receipt and TDS certificates for the annual return (due within 3 months of FY-end — Ashwin end ~mid-Oct, extendable 3 months with interest on unpaid balance, per IRD notice — verify current deadlines on ird.gov.np).

Interest & Penalties for Shortfall

Shortfall vs required coverage of actual taxInterest under the interest provisions of the Income Tax Act (commonly cited as Sec 117/118 on shortfall from 90% of final assessed tax — verify current Act text) if installments + TDS fell short by Ashad end
Late final returnInterest continues on unpaid balance after Ashwin end; extension does not waive interest (per IRD notice — verify)
Rule of thumbEnsure the required share (commonly applied as 90%) of final tax is covered by (installments + TDS) by Ashad end — that is the interest-safe line (confirm factor in current Act text)

Example: Rs 3 Lakh Estimated Tax

Poush end40% of 3,00,000 = 1,20,000. At 90% factor = 1,08,000 due, less any TDS to that date. Pay Rs 1,08,000 (if no TDS).
Chaitra end70% of 3,00,000 = 2,10,000. At 90% = 1,89,000 cumulative. Less already paid (1,08,000) + TDS = balance due.
Ashad end100% = 3,00,000. At 90% = 2,70,000 cumulative. Less all earlier installments + TDS + medical credit = final installment amount.

If TDS of Rs 30,000 was credited by Chaitra, the Chaitra installment falls: 1,89,000 − 1,08,000 − 30,000 = Rs 51,000 instead of Rs 81,000. (Illustrative — uses the commonly applied 90% factor; confirm factor in current Act text.)

Common Mistakes to Avoid

  • Using FY (Shrawan–Ashad) month-ends vs English calendar dates — IRD uses Nepali month-ends
  • Ignoring TDS credits to each date when computing the installment balance
  • Not revising the estimate when income drops or spikes — then paying interest on the gap to the required share of actual tax
  • Assuming “small business = no advance tax” without checking the Sec 94(2) installment floor against your estimate (Rs 7,500 annual figure is not the statutory test)
  • Missing the Ashad end installment and waiting for the annual return — interest has already started accruing

Checklist

  • Confirm you have business/investment assessable income (or transaction-base track)
  • Estimate the year’s tax before each installment date; revise via Sec 95 if needed
  • Compute: commonly 90% × estimate less (already paid + TDS + deemed withholding + Sec 51 medical) to that date (confirm factor in Act text)
  • Pay by Poush / Chaitra / Ashad end via taxpayerportal.ird.gov.np and keep vouchers + TDS certificates
  • Ensure the required share (commonly 90%) of final tax is covered by Ashad end to avoid interest; file the annual return by Ashwin end (per IRD notice — verify)

Official Sources & Final Note

Sources: Inland Revenue Department (ird.gov.np) — Income Tax Act 2058 Sec 94 (installments), Sec 95 (estimate/revised estimate), full Act text via lawcommission.gov.np, taxpayerportal.ird.gov.np, and IRD advance-tax notices. Transaction-based track commonly cited as Sec 94(11A) — verify numbering in current Act text.

Last updated: September 27, 2026. Rechecked as of October 2026. Installment percentages are statutory but Finance Acts can adjust related rates and thresholds. Verify the current portal wording and Act text before paying. SolutionsNepal is an educational guide, not a tax advisor.

Frequently asked questions

Who must pay advance tax?

Anyone who has or will have assessable income from business or investment in the income year (Sec 94) — companies, firms, freelancers and other business/investment taxpayers. Employment-only income is handled via employer withholding, not advance installments. No installment is due if the installment amount is below the statutory floor in Sec 94(2) (commonly cited as Rs 2,000 per installment — verify the current Act text on lawcommission.gov.np; an Rs 7,500 annual figure circulates in guides but is not the statutory test).

When are advance tax installments due?

Three installments: 40% of estimated tax by end of Poush (~mid-Jan), 70% cumulative by end of Chaitra (~mid-Apr), 100% by end of Ashad (~mid-Jul). Dates are Nepali calendar month-ends per Sec 94 — verify current IRD notice.

What is estimated tax?

Your own estimate of the year's tax under Sec 95 at each installment date, less already-paid installments, TDS credits to that date, tax deemed withheld under Sec 90(3), and admissible medical tax credit under Sec 51 to that date (per Act definitions — verify current text).

Can I revise the estimate?

Yes under Sec 95 — file a revised estimate when the business outlook changes. Each installment is computed from the estimate/revised estimate for that period less earlier installments/credits (see Act text for the exact factor).

What about transaction-based taxpayers?

Those taxed on turnover/transaction (commonly cited as Sec 94(11A), e.g., presumptive — verify current Act numbering) pay in two installments: by Poush end on actual transactions to 20 Poush, and by Ashad end on estimated full-year transactions based on actuals to 20 Ashad, less the first payment.

What is the penalty for late/underpayment?

Interest under the interest provisions of the Income Tax Act on shortfall from the required coverage of actual year-end liability (commonly cited as Sec 117/118 against 90% of actual liability — verify current Act text). Pay at least the required share of final tax via installments + TDS by Ashad end to avoid interest. Final return is still due within 3 months of FY-end (Ashwin end, ~mid-Oct), extendable 3 months with interest on unpaid balance (per IRD notice — verify).

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Written by SolutionsNepal Team

Nepal tax researchers