Quick answer — closing a PAN in Nepal:
- The ordinary route: apply in writing to your Inland Revenue Office to suspend the PAN under Income Tax Act s.78A — for example because the business stopped, the entity closed, or the sole proprietor died.
- The 2083 window: under Finance Act 2083 s.40(2), a PAN holder who never traded and has not filed for FY 2081/82 or earlier can file the FY 2082/83 return, pay the tax on it, and apply to cancel or resume. Earlier years are then not required.
- Deadline: Poush end 2083 — 14 January 2027. A dormant PAN with no application by then is cancelled automatically, and reviving it later means the returns, tax, fees and interest for the years in between.
- What the window waives: fees and interest. The income tax sections do not say penalties; the VAT section does.
The Finance Act 2083 Window: Poush End 2083
Section 40 of the Finance Act 2083 has three parts, one for each kind of PAN problem. The deadline is the end of Poush 2083, which is 14 January 2027.
| Your situation | What you do | What is waived |
|---|---|---|
| s.40(1) — earned taxable income but never took a PAN | Take a PAN, file returns for FY 2079/80 to 2082/83 and pay the tax on them | Fees and interest on that tax; nothing is required for years before 2079/80 |
| s.40(2) — hold a PAN but never traded, and have not filed for FY 2081/82 or earlier | File the FY 2082/83 return, pay its tax, and apply to cancel or to resume business | The returns for earlier years are not required |
| s.40(3) — hold a PAN and earned income, but did not file or pay | File the return and pay the outstanding tax plus 1% of that tax | All fees and interest on that tax |
The 1% in s.40(3) is 1% of the outstanding tax, not of turnover. On NPR 80,000 of unpaid tax that is NPR 800 on top, in place of the fees and interest that would otherwise run.
If you hold a dormant PAN and do nothing. Under s.40(2), where no application is made within the period, the PAN is cancelled automatically. If you later want it back — to resume trading, or because a bank or landlord needs it — you must file the returns and pay the tax, fees and interest for the intervening period. A dormant PAN costs nothing to close before 14 January 2027 apart from one year’s return; reviving one afterwards does not.
Fees and interest — not penalties
Most summaries of this window say it waives “fees, penalties and interest”. The income tax section does not say penalties. In the Finance Act 2083 the word appears where it is meant: the VAT relief in s.41 and the settlement relief in s.44 expressly waive penalties, and s.40 waives fees and interest. If a penalty has been separately imposed on you, do not assume s.40 removes it — ask your Inland Revenue Office.
The VAT side: s.41
A VAT-registered business has a parallel window to the same date. If it made taxable sales and did not collect or deposit the VAT, or collected it but did not file, it can file the returns for the period up to Chaitra 2082, deposit the tax plus 1%, and have the interest, fees, charges and penalties on that tax waived. Closing a VAT-registered PAN means dealing with the VAT position as well; see VAT registration.
Does it apply to a company?
Section 40 speaks of “any person” and a “taxpayer”, with no carve-out for companies, and we have found no exclusion. We have not seen the IRD confirm how it treats a Pvt. Ltd. under s.40(2), so confirm with your Inland Revenue Office. A company that never traded also has the OCR side to settle — the annual returns and the s.81 fines — which is a separate office and a separate law; see closing a company.
How people are using it
The take-up has been real. By Bhadra 2083 the Inland Revenue Office in Chitwan reported 2,906 businesses using the Finance Act reliefs, including 266 who had taken a PAN and never traded and 7 who had traded without one. Those are one district’s figures; we have found no national count.
How to apply
The IRD has published approved application forms for the Finance Act 2083 reliefs. Apply to the Inland Revenue Office that holds your PAN, with the return for the year and proof of the tax paid. Reporting also describes an online route through the self-assessment return on the IRD taxpayer portal, where a discount or waiver type is selected before payment; we have not been able to confirm it ourselves, so ask the office which route your PAN is on.
Holding a PAN you never used? Send us the PAN and your name or business name. We will check what the IRD shows against it, file the FY 2082/83 return, and make the cancellation application before Poush end.
Close my PANClients include Doconest Technology Pvt. Ltd., Tablesathi and Goma Ganesh Suppliers — more about us.
The Ordinary Route: Suspending a PAN Under Section 78A
Outside the 2083 window, there is no single “cancel PAN” button. The Income Tax Act 2058 issues a PAN under s.78, and s.78A — स्थायी लेखा नम्बर स्थगन — lets the Department suspend it. The grounds include:
- the person’s transactions have stopped;
- the entity has closed, been sold or transferred, or otherwise ceased to exist;
- the owner of a sole proprietorship has died;
- the PAN was registered by mistake.
Section 78A leaves the procedure to the Income Tax Rules, which set it in Rule 23A. The text we could read requires the application, with its reasons, within 30 days of the circumstance arising. Apply to the Inland Revenue Office that holds your PAN.
What the office will look for
Suspension stops future obligations; it does not settle past ones. Expect the office to check that every return up to the date is filed and the tax paid — in practice the same position you would need for a tax clearance certificate. If you are VAT-registered, the VAT returns and any VAT due are part of that picture.
The order for a company
- Bring the tax returns up to date and pay what is due.
- Obtain the tax clearance certificate — the OCR asks for it with a deregistration application.
- Close the company at the OCR by whichever of the four routes applies to you.
- Apply to suspend the PAN on the ground that the entity has ceased to exist.
Suspended, Cancelled, Dormant: Which Is Which
| Term | Where it comes from | What it means |
|---|---|---|
| Suspended (स्थगन) | Income Tax Act s.78A | The ordinary way a PAN is stopped, on application or by the Department |
| Cancelled (खारेज) | Finance Act 2083 s.40(2) | What happens to a dormant PAN with no application by Poush end 2083, or on a successful application under it |
| Dormant | Ordinary usage, not a legal status | A PAN that exists but has no trading and no returns — the liability keeps running |
What Other Guides Get Wrong
- “Fees, penalties and interest are waived” under s.40. Section 40 waives fees and interest. Penalties appear in the VAT and settlement sections, not this one.
- “The PAN may be cancelled.” Under s.40(2) it is cancelled automatically if no application is made in time.
- “You will have to file every year to revive it.” The obligation is for the intervening period — the years between the cancellation and the revival.
- “The deadline will not be extended.” Nobody can know that. What we know is the date in the Act: Poush end 2083.
Frequently Asked Questions
How do I cancel a PAN in Nepal?
Apply in writing, with reasons, to the Inland Revenue Office that holds the PAN, to suspend it under Section 78A of the Income Tax Act — for example because the business stopped or the entity closed. File any outstanding returns and pay the tax first. A PAN holder who never traded can instead use Finance Act 2083 s.40(2): file the FY 2082/83 return, pay its tax and apply to cancel by Poush end 2083 (14 January 2027).
What happens to an unused PAN after Poush end 2083?
Under Finance Act 2083 s.40(2), a PAN holder who never traded and has not filed for FY 2081/82 or earlier, and who makes no application by Poush end 2083, has the PAN cancelled automatically. Reviving it later requires the returns and the tax, fees and interest for the intervening period.
Does the Finance Act 2083 waive penalties on unpaid income tax?
Section 40 waives fees and interest. The VAT relief in Section 41 and the settlement relief in Section 44 expressly waive penalties; Section 40 does not say so. Ask your Inland Revenue Office about any penalty separately imposed.
What is the 1% in the Finance Act 2083 tax amnesty?
Under s.40(3), a PAN holder who earned income but did not file or pay can file, pay the outstanding tax plus an additional 1% of that tax by Poush end 2083, and have the fees and interest on it waived. It is 1% of the tax, not of turnover.
Can a private limited company use Section 40?
The section speaks of any person or taxpayer and we have found no exclusion for companies, but we have not seen the IRD confirm how it applies to a Pvt. Ltd. Confirm with your Inland Revenue Office. A company also has to settle its OCR filings, which Section 40 does not touch.
Is suspending a PAN the same as cancelling it?
Not in the law’s words. The Income Tax Act uses suspension (s.78A) for the ordinary process; the Finance Act 2083 uses cancellation for the dormant-PAN window. Either way the PAN stops, and neither erases tax already owed.
About this guide. Sections 78 and 78A are from the Income Tax Act 2058 as published by Nepal Laws; Rule 23A from the Income Tax Rules 2059. Sections 40, 41 and 44 of the Finance Act 2083 are taken from the Institute of Chartered Accountants of Nepal’s section-by-section summary of the Finance Bill, because the IRD and gazette texts could not be reached while this was written; the IRD’s own explanatory booklet on the 2083 reliefs is the document to check against. The Chitwan figures are from DC Nepal’s reporting of Bhadra 2083. Confirm your position with your Inland Revenue Office before relying on it.
Closing a PAN or Clearing a Backlog?
We check what the IRD shows against your PAN, file the FY 2082/83 return, and make the cancellation or Section 40 application — for individuals, sole proprietors and companies.
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