Kathmandu, July 14: The Inland Revenue Department (IRD) has clarified that Approved Retirement Funds (ARFs) are exempt from paying income tax on income earned from investments and bank debentures.
The clarification came after CDS and Clearing Limited sought the department’s interpretation regarding whether income earned by approved retirement funds from such investments was subject to taxation.
In response, the IRD issued a formal decision on Asar 29, 2083 (July 13, 2026), clarifying the applicable legal provisions.
According to the department, Section 64(2) of the Income Tax Act, 2002 (2058 BS) explicitly exempts the income of approved retirement funds from income tax, provided the fund has been approved under Section 63 of the Act.
The IRD also referred to Rule 20(2) of the Income Tax Rules, 2002 (2059 BS), which specifies that approved retirement funds may invest only in designated sectors. These include investments in the Citizens Investment Trust, Government of Nepal securities, banks and financial institutions, banking co-financing arrangements, and investments made for beneficiaries other than the fund’s own shareholders.
The department clarified that investments made by approved retirement funds in debentures issued by banks operating under prevailing banking laws also fall within the category of approved investments.
Accordingly, income generated from the sale or redemption of such bank debentures is also exempt from income tax under Section 64(2) of the Income Tax Act.
The clarification was issued through a letter signed by Branch Officer Bishwanath Rai, with copies sent to Nepal Rastra Bank and Nepal Bank Limited (Employees’ Retirement Fund Management Trust). #nepal
