Tax slab Nepal: income tax rates for FY 2083/84, explained with worked examples

Nepal's personal income tax is progressive and marginal: each rate applies only to the slice of annual taxable income that falls inside its band, not to the whole amount. Someone earning Rs 18,00,000 does not pay 20% on Rs 18,00,000 — they pay 1%, then 10%, then 20% on three separate slices.

• 1% — up to Rs 10,00,000
• 10% — Rs 10,00,001 to Rs 15,00,000
• 20% — Rs 15,00,001 to Rs 25,00,000
• 27% — Rs 25,00,001 to Rs 40,00,000
• 29% — above Rs 40,00,000

What changed from the prior fiscal year, under the Finance Act 2083 (authenticated 14 July 2026, effective from Shrawan 1, 2083 BS / 16 July 2026): six bands became five, the first band was raised from Rs 5,00,000 to Rs 10,00,000, the top rate was cut from 39% to 29%, and — the change most payroll teams have missed — the separate schedule for taxpayers electing married-couple status was abolished. Every resident natural person now uses one unified table, so the old Rs 6,00,000 couple threshold no longer exists. Practically, a much larger share of Nepal's formal workforce now sits inside the 1% band, and senior salaries in IT and banking lost ten points off the top marginal rate.

One drafting quirk worth knowing, because it explains the top rate: Schedule 1(1) does not state 29% as a rate. It sets Rs 6,65,000 of tax at Rs 40,00,000, then adds two percentage points to the fourth-band rate on income above that — 27% + 2% = 29%. On Rs 45,00,000, that is Rs 6,65,000 plus 29% of Rs 5,00,000, or Rs 8,10,000 in total.

The slab table answers a legal question. This table answers the one people actually ask: on my salary, what is the number? Each row below is annual taxable income after allowable deductions, with tax computed band by band. The second figure is the same salary for an SSF contributor, where the 1% band falls away.

• Rs 6,00,000 (Rs 50,000/month) — Rs 6,000 tax; Rs 0 if SSF. Effective rate 1.0%.
• Rs 12,00,000 (Rs 1,00,000/month) — Rs 30,000 tax; Rs 20,000 if SSF. Effective rate 2.5%.
• Rs 18,00,000 (Rs 1,50,000/month) — Rs 1,20,000 tax; Rs 1,10,000 if SSF. Effective rate 6.7%.
• Rs 24,00,000 (Rs 2,00,000/month) — Rs 2,40,000 tax; Rs 2,30,000 if SSF. Effective rate 10.0%.
• Rs 36,00,000 (Rs 3,00,000/month) — Rs 5,57,000 tax; Rs 5,47,000 if SSF. Effective rate 15.5%.
• Rs 60,00,000 (Rs 5,00,000/month) — Rs 12,45,000 tax; Rs 12,35,000 if SSF. Effective rate 20.8%.

Read the shape, not just the rows. Nepal's effective tax curve stays under 10% until roughly Rs 2,00,000 a month, then climbs steeply. That is the practical reason senior offers in Kathmandu should be modelled on take-home rather than gross: the gap between a Rs 2 lakh and a Rs 5 lakh monthly package narrows once the 27% and 29% bands start biting.

Walk it band by band, because this is the calculation an auditor will replicate:.

• First Rs 10,00,000 @ 1% = Rs 10,000 (Rs 0 for an SSF contributor)
• Next Rs 5,00,000 @ 10% = Rs 50,000
• Remaining Rs 3,00,000 @ 20% = Rs 60,000
• Total = Rs 1,20,000, or Rs 1,10,000 if SSF-eligible
• Monthly TDS = Rs 10,000, or Rs 9,167 if SSF-eligible

Taxable income is not gross salary. Before the slabs apply, payroll strips out the contributions and allowances the Income Tax Act permits, and adds back the cash benefits people forget are taxable.

• Included: basic salary, allowances paid in cash, overtime, incentives and commissions, and the Dashain / festival bonus (culturally a 13th month, legally taxable pay).
• Deducted before slabs: the employee's own retirement contribution — SSF or an approved provident fund — subject to the statutory ceiling.
• Contribution deduction ceiling: one-third of assessable income or Rs 5,00,000 a year, whichever is lower. Contributions above that ceiling are not deductible, though they still credit to the contributor's account.
• Employer-side SSF contribution is an employer cost, not employee income — it does not enter the employee's taxable base.
• Non-cash benefits (vehicle, accommodation) are valued under prescribed rules rather than at actual cost — do not book them at invoice value.

The slab table is the easy half. The reason two employees on the same Rs 18,00,000 pay different tax is everything that happens either side of the slabs: reductions and deductions lower taxable income before the rates apply, credits lower the tax after. Ceilings for FY 2083/84:.

• Approved retirement fund contributions (SSF, PF, CIT): the lowest of one-third of income, Rs 5,00,000, or the actual contribution.
• Life insurance premium: actual premium or Rs 40,000, whichever is lower — the policy must be with a resident insurer.
• Health insurance premium: actual premium or Rs 20,000, whichever is lower, again with a resident insurer.
• Private residential building insurance: actual premium or Rs 10,000, whichever is lower.
• Children's education fees: 25% of annual tuition or Rs 25,000, whichever is lower.
• Remote-area allowance: a flat additional deduction by grade — Rs 50,000 (A), Rs 40,000 (B), Rs 30,000 (C), Rs 20,000 (D), Rs 10,000 (E).
• Pension income relief: 25% of the first band (Rs 2,50,000) or actual pension receipts, whichever is lower — and it also switches off the 1% social security tax.
• Incapacitated natural person: 50% of the first band (Rs 5,00,000) or actual income, whichever is lower.
• Foreign allowance at a Nepali diplomatic mission: only 25% counts as employment income; 75% is excluded.

Credits then come off the computed tax, not the income: a 10% female tax credit for female taxpayers whose only income is remuneration; a medical tax credit of the greater of Rs 1,500 or 15% of approved medical expenses, capped at the actual liability and carried forward if unused; and a foreign tax credit, per country, of the lower of foreign income times the average Nepal rate or the foreign tax actually paid.

Nepal collects salary tax through TDS (tax deducted at source). The employer estimates the employee's annual taxable income at the start of the fiscal year, computes the annual liability across the slabs, divides by twelve, and deducts that amount each month — then trues it up when pay changes.

• Deduct monthly, deposit to the IRD by the statutory deadline for the following month — late deposit attracts interest and penalty, and the interest is not deductible.
• Re-run the estimate on every material pay event: promotion, increment, bonus declaration, or a mid-year joiner's part-year annualisation.
• A mid-year joiner is taxed on the income earned in Nepal in that fiscal year, not on the annualised full-year figure — annualising a Poush joiner over-withholds.
• Issue TDS certificates to employees and file the annual withholding return; employees need the certificate for their own return and for tax clearance.
• Fiscal year runs mid-July to mid-July (Shrawan to Ashadh). Do not compute Nepali payroll tax on a January-to-December basis, even for a foreign parent company's reporting calendar.

Under the Contribution Based Social Security Act, registered employers and employees contribute a combined 31% of basic salary to the Social Security Fund — 20% employer, 11% employee — covering medical, accident, disability, dependent-family and old-age benefits. For an SSF contributor, the 1% social security tax on the first Rs 10,00,000 does not apply.

• The saving from losing the 1% band is capped at Rs 10,000 a year, so the SSF decision is never really a tax decision — it is a benefits and compliance decision.
• The employee's 11% is deductible against taxable income within the one-third / Rs 5,00,000 ceiling, which is where the real tax effect sits.
• Employer cost is the number to quote internally: 20% of basic on top of gross pay, with no additional employer payroll tax beyond it.
• Voluntary contributions above the mandatory 11% are credited to the contributor's retirement account, and remain subject to the same deduction ceiling.

Salary slabs are not the right table for a Nepal-based freelancer billing clients abroad. Under Section 95A, three categories of foreign-sourced service income carry a 5% advance tax, deducted by the receiving Nepali bank at the point of inward remittance and treated as final tax on that income: software and IT-related services, consultancy services, and payments received in foreign currency for uploading audio-visual content on social media.

• Invoice a foreign client Rs 1,00,000; the bank deducts Rs 5,000 and credits Rs 95,000. No further income tax is payable on that receipt.
• You must be a resident natural person who is not engaged in business operation — the 5% regime does not apply once you are billing through a registered company, and a taxpayer registered as a private firm is treated differently.
• Get a Personal PAN from the IRD before the first remittance — free, and typically issued in one to three working days.
• Keep every bank-issued advance tax certificate and inward remittance advice; that set is the audit trail.
• File the annual individual return anyway, and collect a tax-clearance certificate — banks, visa applications and tenders all ask for it.

• Shrawan (mid-July) — new fiscal year begins; reload slabs from the current Finance Act and re-run every employee's annual estimate.
• Monthly — deposit TDS and SSF contributions by the statutory deadline for the preceding month.
• Ashoj / Kartik — Dashain bonus declared; fold it into the annual estimate before it is paid, not after.
• Ashadh (mid-July) — fiscal year closes; true up under- or over-withholding and issue TDS certificates.
• Post-year-end — individual returns and tax-clearance certificates through the IRD.