Kathmandu: Nepal’s Office of the Auditor General has directed the government to investigate large-scale tax evasion linked to real estate transactions after finding that taxpayers concealed billions of rupees in income from land sales.
The 63rd annual report of the Auditor General states that 123 taxpayers under 36 different tax offices, including large and medium taxpayers, failed to disclose profits earned from land transactions in violation of the Income Tax Act, 2002.
According to data from the Department of Land Management and Archives, those taxpayers sold land worth a combined Rs 3.97 billion. However, the income generated from those transactions was not included in their tax filings. The report says the government should assess and recover around Rs 677.8 million in unpaid taxes from those deals.
The report details several cases of suspected tax evasion.
One taxpayer under the Medium Taxpayers Office reportedly sold land worth Rs 1.01 billion but disclosed only Rs 177.2 million in financial statements. By understating income by Rs 737.8 million, the taxpayer is suspected of evading more than Rs 184.4 million in taxes.
Similarly, a taxpayer under the Inland Revenue Office, Balaju, sold land worth Rs 260 million but had reportedly failed to file income statements for several years. The report states that the transaction generated a profit of Rs 194.8 million, on which more than Rs 48.7 million in taxes remain unpaid.
In another case, land in Ward No. 1 of Lalitpur Metropolitan City was sold for Rs 128.6 million, but the taxpayer failed to disclose the transaction in both financial and income statements. As a result, around Rs 32.1 million in taxes has yet to be collected.
The Auditor General also found that six taxpayers under the Inland Revenue Office, Itahari, sold land worth Rs 266.3 million over six years despite remaining non-filers during that period.
Irregularities were also identified in the financial reporting of a medical college registered under the Inland Revenue Office, New Baneshwor. According to the report, the institution had previously revalued its land assets upward but later reported a loss of Rs 82.3 million while selling the property, apparently in an attempt to evade taxes. The report described the transaction as suspicious, noting that land valued at Rs 103 million was shown as sold for only Rs 37.5 million.
Another taxpayer in Dharan allegedly concealed details of land sales worth Rs 45.5 million, leaving around Rs 11.3 million in taxes unpaid.
Under Section 7(2) of the Income Tax Act, profits earned from the disposal of business assets or inventory must be included as taxable income. However, the Auditor General found that many taxpayers either submitted records inconsistent with official government data or failed to file returns altogether.
The report has instructed authorities to investigate all such cases further and recover outstanding taxes along with applicable interest and penalties.
In a separate finding, the Auditor General revealed that 469 individuals earning more than Rs 4 million annually failed to submit mandatory income declarations, affecting a substantial amount of government revenue.
Under Section 96 of the Income Tax Act, any individual with an annual income exceeding Rs 4 million must file a mandatory “Day 4” tax declaration. The Inland Revenue Department had already instructed tax offices through its integrated tax system to identify and examine taxpayers who failed to comply.
Based on those directives, authorities reviewed sample taxpayers under 28 tax offices, including New Road, Tripureshwor, Butwal, and Bharatpur. The audit found that 469 taxpayers failed to submit the required returns during the 2023/24 fiscal year alone.
According to the report, those individuals collectively earned Rs 3.98 billion, on which approximately Rs 679.4 million in income tax has yet to be paid.
The Auditor General has directed the relevant authorities to intensify investigations against taxpayers who either evade taxes by not filing returns or fail to complete the required procedures, and to recover all outstanding dues.
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