Nepal Salary Tax Guide 2026/2027
For the Fiscal Year 2083/84
Deductions (Annual)
Capped at NPR 300,000
Capped at NPR 40,000
What is Salary Tax in Nepal?
Salary tax in Nepal is a direct tax levied on the income earned by individuals from employment, including salaries, wages, bonuses, and other employment benefits. The tax system operates under the Income Tax Act 2058 (2002) and is administered by the Inland Revenue Department (IRD) of Nepal. The government uses a progressive tax system, meaning higher income levels are taxed at higher rates, ensuring fair contribution based on earning capacity.
Current Tax Slabs for FY 2083/84
The Finance Act 2083 introduced a single unified tax schedule for all resident natural persons in Nepal. The separate married and unmarried slabs have been merged, the first 1% band was doubled to NPR 1,000,000, and the top rate was cut from 39% to 29%.
Tax Slabs for All Resident Natural Persons
| Annual Income (NPR) | Tax Rate | Tax Calculation |
|---|---|---|
| Up to 1,000,000 | 1% | 1% of total income (Social Security Tax) |
| 1,000,001 – 1,500,000 | 10% | 10,000 + 10% of amount above 1,000,000 |
| 1,500,001 – 2,500,000 | 20% | 60,000 + 20% of amount above 1,500,000 |
| 2,500,001 – 4,000,000 | 27% | 260,000 + 27% of amount above 2,500,000 |
| Above 4,000,000 | 29% | 665,000 + 29% of amount above 4,000,000 |
FY 2082/83 vs FY 2083/84 Comparison
| Feature | FY 2082/83 (old) | FY 2083/84 (new) |
|---|---|---|
| Tax schedule | Separate for single & married couples | Single unified schedule for everyone |
| First 1% band | NPR 500,000 (single) / 600,000 (couple) | NPR 1,000,000 (all) |
| Number of slabs | 6 (1 / 10 / 20 / 30 / 36 / 39%) | 5 (1 / 10 / 20 / 27 / 29%) |
| Top marginal rate | 39% (above NPR 5,000,000) | 29% (above NPR 4,000,000) |
Worked Example
Taxable income of NPR 4,500,000
Up to 1,000,000 → 1% = NPR 10,000
1,000,001 – 1,500,000 → 10% of 500,000 = NPR 50,000
1,500,001 – 2,500,000 → 20% of 1,000,000 = NPR 200,000
2,500,001 – 4,000,000 → 27% of 1,500,000 = NPR 405,000
Above 4,000,000 → 29% of 500,000 = NPR 145,000
The same income would have cost about NPR 1,285,000 under the old FY 2082/83 schedule — a saving of roughly NPR 475,000 (~37%).
How to Calculate Salary Tax in Nepal
Using a Nepal salary tax calculator simplifies the process, but understanding the manual calculation helps ensure accuracy.
- Determine Gross Annual Income: Calculate your total annual income by multiplying your monthly salary by 12 and adding any bonuses, allowances, or additional earnings.
- Identify Taxable Income: Not all income is taxable. Subtract exempted amounts such as Festival allowances, Provident Fund (PF) / Social Security Fund (SSF) contributions, Citizen Investment Trust (CIT) contributions, and Insurance premiums.
- Apply Appropriate Tax Slab: Apply the relevant tax slab from the single unified table above. The same schedule now applies to everyone regardless of marital status.
- Calculate Final Tax Liability: Use the progressive tax calculation method where different portions of your income are taxed at different rates.
Key Deductions and Exemptions
Maximizing your deductions can significantly reduce your tax liability. Here are the main deductions available:
Mandatory Deductions
- Social Security Fund (SSF): 11% of basic salary contributed by employee.
- Provident Fund (PF): Employee’s contribution to PF.
- Citizen Investment Trust (CIT): Up to NPR 300,000 annually.
Optional Deductions
- Life Insurance Premium: Up to NPR 40,000 per year.
- Medical Expenses: For elderly parents (subject to conditions).
- Remote Area Allowance: Additional deduction up to NPR 50,000 for those working in remote areas.
Common Mistakes to Avoid
- Not declaring all investments: Many taxpayers forget to declare all eligible deductions, resulting in higher tax payments.
- Applying the old FY 2082/83 slabs: The tax-free band is now NPR 1,000,000 and the top rate is 29% under FY 2083/84 — make sure you use the new unified schedule.
- Missing remote area allowance: If working in remote areas, ensure to claim this additional deduction.
- Late filing: Penalties apply for late submission of tax returns.
- Not reconciling TDS: Ensure the TDS deducted by employer matches your calculation.