New vehicle tax-related policies of provincial governments summarized

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KATHMANDU: All seven provincial governments have prioritized the digitization of transport services in their respective budgets for the upcoming fiscal year 2025/26.

They have expressed a commitment to making all vehicle-related processes available online and issuing smart driving licenses independently. Several provinces have also introduced tax exemptions on various types of vehicles to promote sustainable mobility and ease financial burdens on people.

To provide relief to people who have been waiting for smart driving licenses from the federal government for years, Koshi, Gandaki, and Karnali governments have allocated budgets to print licenses independently from the new fiscal year.

MeroAuto has summarized vehicle-related tax policies announced by the provincial governments in their new budgets.

Koshi Province
Koshi Province has announced full tax exemptions for vehicles powered by compressed natural gas (CNG), mono-fuel, dual-fuel and green hydrogen. Additionally, vehicles providing direct transport services from border areas to tourist destinations within Koshi or other provinces will also be exempt from taxes.

Madhesh Province
Madhesh has not proposed any vehicle-related tax exemptions in its budget for the upcoming fiscal year.

Bagmati Province
Bagmati has introduced waivers on annual vehicle tax, renewal fees, and penalties for overdue payments. Vehicle owners who clear their dues for the past three years by the end of 2025/26 (mid-July next year) will receive full exemptions on outstanding taxes and fines. The province has also allowed the decommissioning and auctioning of government-owned vehicles if deemed unrepairable. All outstanding dues will be waived in such cases. Similarly, owners of public vehicles over 20 years old who deregister and clear their dues within 2025/26 will receive full waivers on taxes and fines for up to 20 years. Additionally, transport-related businesses, such as training centers, factories, workshops, and reconditioning houses, that have not renewed their registrations will be granted a full waiver on backdated dues and penalties, provided they pay the current renewal fee within the new fiscal year.

Gandaki Province
Gandaki has offered a 60% tax exemption on buses, minibuses and microbuses that provide fare discounts to senior citizens, people with disabilities and students.

Lumbini Province
Lumbini has introduced a 75% waiver on penalties for delayed vehicle renewals. Vehicle owners who renew registrations by mid-January 2026 will be required to pay the applicable taxes, while 75% of accumulated penalties will be waived.

Karnali Province
Karnali has announced a 50% tax exemption for rental vehicles, particularly buses, minibuses and microbuses, that offer fare discounts to students, senior citizens and people with disabilities, as long as the vehicles display appropriate stickers or notices in line with transport office regulations. The province will also waive all dues and penalties, except for the last two fiscal years, on government vehicles that are unusable and auctioned with necessary approvals.

Sudurpashchim Province
Sudurpashchim has not introduced any vehicle-related tax exemption measures in its budget for 2025/26.

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