Advance Tax Instalment Deadlines in Nepal (Poush–Ashadh)

If you're a business owner, professional, or self-employed taxpayer in Nepal, you already know that annual tax filing isn't the only deadline that matters. Nepal's Income Tax Act, 2058 requires most taxpayers to pay advance tax in three instalments during the fiscal year itself — well before the final return is due. Missing these instalment dates doesn't just create a paperwork headache; it triggers interest charges that quietly eat into your profits. In this guide, we break down exactly when these instalments fall — Poush, Chaitra, and Ashadh — how much you owe at each stage, and how to calculate your estimated liability so you're never caught off guard.

What Is Advance Tax and Who Pays It

Advance tax is a system where taxpayers estimate their annual income tax liability and pay it in parts throughout the year, rather than as one lump sum after the fiscal year ends. The Inland Revenue Department (IRD) uses this mechanism to ensure a steady flow of tax revenue and to reduce the risk of large, unmanageable dues piling up at year-end.

Under Nepali tax law, any taxpayer whose estimated tax liability for the year exceeds a prescribed threshold — including companies, partnership firms, and individuals with business or investment income — is generally required to pay advance tax. This typically applies to:

• Registered companies (private and public)
• Partnership firms and proprietorship businesses above the threshold
• Individuals earning income from business, rent, or investment sources
• Professionals such as consultants and contractors with substantial annual income

Salaried individuals whose tax is fully deducted at source (TDS) by their employer usually don't need to separately pay advance tax, since the employer's monthly withholding already serves this purpose.

Nepal's three advance tax instalment dates and their cumulative percentage.

The Three Instalment Dates and % Due at Each

Nepal's advance tax structure is built around three checkpoints tied to the end of specific months in the Nepali calendar. Each instalment is a cumulative percentage of your total estimated annual tax liability — meaning by each date, that percentage of your full-year estimate must already be paid.

• First instalment — Poush end (mid-January): 40% of the estimated annual tax liability must be paid by this date.
• Second instalment — Chaitra end (mid-April): A cumulative 70% of the estimated annual tax liability must be paid by this date.
• Third and final instalment — Ashadh end (mid-July): The full 100% of the estimated annual tax liability must be paid, effectively closing out the fiscal year.

It's important to note these are cumulative thresholds, not separate equal blocks. That means at the second instalment, you don't pay another flat 70% — you pay only the incremental amount needed to bring your total cumulative payment up to 70% of the estimate.

How to Calculate Estimated Tax Liability

Since advance tax is based on an estimate, taxpayers need a reasonable, defensible method for projecting their annual liability. The most common approaches are:

• Prior-year basis: Many businesses start with the previous year's actual tax liability and adjust for known changes in revenue, expenses, or tax rates.
• Current-year projection: Businesses with fluctuating income often build a fresh projection using year-to-date actuals plus a forecast for the remaining months.
• Sector-specific adjustments: Seasonal businesses should account for peak and low periods rather than simply dividing income evenly across the year.

Once you have an annual estimate, applying the 40/70/100 cumulative structure becomes straightforward. Here's a simplified example assuming an estimated annual tax liability of NPR 6,00,000:

Sample instalment-wise breakdown for an estimated annual liability of NPR 6,00,000.

If your actual income later turns out higher or lower than expected, you are allowed — and encouraged — to revise your estimate before the next instalment date so your payments stay reasonably aligned with reality.

Penalty for Underpayment/Late Instalment

Falling short at any instalment date, or missing it altogether, attracts interest on the shortfall. The law generally applies interest where the cumulative amount actually paid is less than the required cumulative percentage at that date, calculated on the underpaid portion from the due date until it is settled.

This is separate from the interest and fees that apply to a fully late or unfiled annual return — advance tax shortfalls are assessed instalment-by-instalment, so a shortfall at Poush end that isn't corrected can continue accruing interest even if you eventually catch up at Chaitra end.

Underestimating deliberately to defer cash outflows is a common but risky practice — the interest cost, combined with the administrative scrutiny it can invite, usually outweighs any short-term cash-flow benefit.

Adjusting Advance Tax at Year-End Filing

When you file your final annual income tax return after Ashadh end, the return reconciles your actual tax liability against what you've already paid through the three instalments.

• If you overpaid: The excess can typically be adjusted against future tax liabilities or, in eligible cases, claimed as a refund.
• If you underpaid: The shortfall must be paid along with the final return, and interest may apply for the period the amount remained unpaid.

Keeping your instalment estimates reasonably close to actual performance throughout the year makes this year-end reconciliation smoother and reduces the chance of a large, unexpected final payment.

Frequently Asked Questions

Q1. Do all taxpayers need to pay advance tax?

No. Advance tax generally applies to taxpayers whose estimated annual tax liability crosses a prescribed threshold, such as companies, firms, and business or investment income earners. Salaried employees under full TDS deduction usually don't need to pay it separately.

Q2. What happens if my actual income is lower than what I estimated?

You can revise your estimate at any instalment date. If you still end up overpaying based on the final return, the excess can generally be adjusted or refunded as per prevailing rules.

Q3. Are the instalment dates the same every fiscal year?

The Poush, Chaitra, and Ashadh end structure has remained consistent, but always confirm exact dates and any procedural updates through the current year's IRD notices before making payments.

Q4. Can I pay advance tax online?

Yes. Most taxpayers can pay through the IRD's online payment systems and authorized banks linked to the Taxpayer Portal, in addition to physical tax office counters.

Q5. Is advance tax the same as TDS?

No. TDS (Tax Deducted at Source) is withheld by a payer on specific payments, while advance tax is a self-estimated instalment payment made directly by the taxpayer based on projected annual liability.