Finance Minister Bishnu Prasad Paudel, presenting the NPR 19.64 trillion budget for the fiscal year 2082/83 (2025/26) in a joint session of the Federal Parliament on Thursday at 3 PM, announced a series of tax exemptions and incentives targeting information technology (IT), tourism, and green energy sectors to spur economic growth.

The budget prioritizes IT-based industries and hotels/resorts, granting them special industry status with income tax and electricity tariff exemptions. Income from IT service exports will receive a 75% tax exemption, while individuals exporting IT services from Nepal will pay only a 5% final income tax. Startups with annual turnovers up to NPR 100 million will be exempt from income tax for five years.

To promote sustainable industries, the budget slashes customs duties to 1% on machinery imports for timber seasoning, organic and natural fertilizer production, green hydrogen production, solar and wind energy storage (batteries and equipment), and electric vehicle (EV) charging machine manufacturing or assembly, with all other taxes and duties waived. Green hydrogen and EV charging industries will also enjoy a five-year income tax exemption.

In infrastructure, private sector imports of tunnel boring machines for road, irrigation, and hydropower projects will face only a 1% customs duty, with other taxes exempted. The NPR 16 million price cap for tax-exempt ambulance imports has been removed. Transport service providers can now deduct advance tax paid on vehicle rentals by individuals as an expense when calculating taxable income.

To ease compliance, individuals and businesses failing to submit VAT or excise duty details can settle dues without interest, penalties, or additional fees. International airlines and air ticket agents registering for VAT and clearing outstanding dues will also have interest, penalties, and fees waived. Additionally, VAT on digital payments has been abolished, and advance income tax on food grains, pulses, fruits, and animal/plant-based products at customs points has been scrapped.

However, taxes and duties on electric vehicles remain unchanged, while customs and excise duties on alcohol, beer, tobacco, and cigarettes have been increased, with the health risk tax scope expanded.

These measures reflect the government’s focus on fostering innovation, sustainability, and private sector growth while balancing revenue needs, as part of its broader economic strategy for 2025/26.