KMC announces tax incentives, penalty waivers for FY 2026/27

Kathmandu, July 18

Kathmandu Metropolitan City (KMC) has introduced a range of tax incentives and penalty waivers for taxpayers for the current Fiscal Year 2026/27. Through its Kathmandu Metropolitan City Finance Act, 2083, the Capital city is implementing tax concessions and penalty remission for a year.

The Act came into effect after being authenticated by Acting Mayor Sunita Dangol on July 16. The legislation provides taxpayers with a range of special discounts, concessions and waivers of penalties on outstanding tax liabilities, the KMC informed in a statement on Saturday.

It said that the special incentives have been announced to encourage taxpayers to pay their dues on time.

Taxpayers who settle their property tax, business tax and rental tax for this fiscal year by the end of mid-October 2026 will receive a 10 per cent discount on the total tax payable.

This period is the first quarter of the current fiscal year.

Likewise, the metropolis has announced significant relief for taxpayers with unpaid taxes from previous years. Taxpayers who clear all outstanding tax liabilities in a single payment by mid-October will have all penalties accumulated in previous years fully waived.

The city has also introduced special provisions to encourage small businesses and support targeted groups. Businesses with capital of up to Rs 500,000, registered in the name of a woman, indigenous person, dalit, person with a disability, or a young entrepreneur under the age of 35, will receive a 40 per cent discount if they pay their taxes by mid-October.

If the business owner is a permanent resident of Kathmandu Metropolitan City, the discount will increase to 50 per cent.

"New industries providing employment to at least 20 people will be entitled to a 95 per cent reduction in business tax for up to three years," read the statement. To promote tourism and improve urban management, the Capital city is implementing an additional 10 per cent discount on property tax for hotels and resorts.

Similarly, buildings constructed solely for commercial parking purposes will be fully exempt from property tax for 10 years from the date of completion. Residential buildings equipped with rainwater recharge systems within their compounds will also be eligible for up to a 95 per cent reduction in property tax.

As per the new rules, taxpayers earning up to Rs 240,000 annually from rent need to pay 5 per cent rental tax, while those earning more than Rs 240,000 annually have to pay 7 per cent rental tax.

The Act also exempts one business signboard of up to 15 square feet used solely for business identification from advertisement tax, and signboards produced in the Ranjana script will receive a 95 per cent tax concession. This measure is taken to promote local language and culture, said KMC.

Likewise, to ease taxpayers' financial burden, KMC has allowed taxes for the current fiscal year to be paid in up to three instalments. Taxpayers may pay 40 per cent of the total amount in the first instalment and 30 per cent each in the second and third instalments.

Taxpayers with outstanding liabilities exceeding Rs 10 million may also apply for a multi-year instalment facility, but this must be approved by the Metropolitan City.

According to KMC, it adopts a stringent approach towards taxpayers who repeatedly ignore tax obligations and official notices. Under the new provisions, the City may seal the business premises of tax defaulters, freeze their bank accounts and recover unpaid taxes in the same manner as government dues.

Published in The Rising Nepal daily on 19 July 2026.