Tax Rate in Nepal: Current Income Tax Slabs for FY 2083/84

The current tax rate in Nepal depends on your income type, taxable income and fiscal year. For salaried employees, Nepal uses progressive tax rates. Therefore, one tax rate does not apply to your entire salary.

The first part of your taxable income falls under the lowest rate. Income above that limit moves through the higher tax slabs.

When a bank customer asks why the salary credited to an account is lower than the amount on an appointment letter, tax is often one reason. However, tax is not the only deduction. PF, CIT, SSF, insurance, staff loans and other payments can also reduce the final credit.

This guide explains the current salary tax in Nepal for FY 2083/84. It also covers the historical FY 2080/81 rates, the 1% Social Security Tax and available tax rebates.

What Does the Tax Rate in Nepal Mean?

A tax rate is the percentage used to calculate tax on taxable income.

For an employee, taxable income does not always mean the full amount shown as gross salary. Eligible retirement contributions, insurance premiums and other deductions may reduce the amount before tax rates apply.

The basic calculation is:

Gross annual income − allowable deductions = net assessable income

The government then applies the relevant tax slabs to the net assessable income.

Nepal uses progressive income tax rates. As a result, earning more does not cause the highest rate to apply to your full salary.

For example, if part of your income reaches the 20% slab, only that part attracts 20%. The lower portions still use the lower rates.

Income Tax Act 2058: The Legal Basis for Salary Tax

The Income Tax Act 2058 provides the main legal framework for income tax in Nepal. It covers employment income, business income, investment income, deductions, tax withholding and tax administration.

However, the applicable rates and limits can change through the annual Finance Act. Therefore, employers must use the rates for the correct fiscal year.

Several provisions matter when checking a salary slip:

• Section 8 explains what may count as employment income.
• Section 50 covers couple assessment.
• Section 87 requires a resident employer to deduct tax from employment payments.
• Schedule 1 provides the applicable personal income tax rates.

Under Section 8, employment income can include more than basic salary. It may include wages, overtime, commission, bonus, allowances and other employment benefits.

Section 87 explains why income tax appears as TDS on a salary slip. The employer deducts the estimated tax before paying the employee.

What Counts as Taxable Income Under Section 8(2)?

When calculating your tax liability, it is vital to know exactly what the law considers “salary.” Under Section 8(2) of the Income Tax Act 2058, taxable remuneration includes your basic wages, leave pay, overtime, commissions, prizes, bonuses, and personal allowances (such as dearness or transport allowances).

You can read the official Income Tax Act 2058 published by the Inland Revenue Department.

Current Income Tax Slabs in Nepal for FY 2083/84

For FY 2083/84, Nepal introduced the same individual income tax slabs for single and couple assessments.

These are progressive rates. Therefore, the 29% rate applies only to taxable income above NPR 40 lakh.

The Inland Revenue Department has published these rates in its FY 2083/84 tax schedule for natural persons.

When Did the FY 2083/84 Tax Rates Take Effect?

The new unified tax slabs were introduced via the Finance Act 2083 and officially took effect on Shrawan 1, 2083. The most notable change this year was the significant top marginal rate reduction. The highest tax bracket dropped from 39% down to 29%, providing substantial tax relief for high-income earners.

How the Current Tax Slab in Nepal Works

Suppose a non-SSF employee has net assessable income of NPR 18 lakh.

The calculation would be:

• First NPR 10 lakh at 1% = NPR 10,000
• Next NPR 5 lakh at 10% = NPR 50,000
• Remaining NPR 3 lakh at 20% = NPR 60,000
• Total annual tax = NPR 1,20,000

The employee does not pay 20% on the full NPR 18 lakh. Only the final NPR 3 lakh falls under the 20% slab.

This is the most important point to understand about each tax slab in Nepal.

Income Tax Slabs in Nepal for FY 2080/81

FY 2080/81 is no longer the current fiscal year. However, many salary statements, tax certificates and search results still refer to these rates.

During FY 2080/81, single and couple assessments had different starting limits.

The 36% rate represented the 30% rate plus a 20% additional charge on that rate. Similarly, the 39% rate represented the 30% rate plus a 30% additional charge.

These historic rates appear in Schedule 1 of the Income Tax Act 2058 as amended for FY 2080/81.

Do not use this table to calculate tax for FY 2083/84. The current income limits and rates are different.

Single vs Married Tax Rates in Nepal

In earlier fiscal years, couple assessment provided a higher first tax band.

For example, in FY 2080/81:

• The single first slab was NPR 5 lakh.
• The couple first slab was NPR 6 lakh.

However, FY 2083/84 uses the same NPR 10 lakh first slab for both assessments. Therefore, selecting married status does not automatically reduce current tax.

Section 50 of the Income Tax Act allows a resident individual and resident husband or wife to elect couple treatment for a particular income year. It is a tax election, not simply a field copied from a bank account or citizenship document.

Employers and payroll teams should use the correct fiscal year before applying the assessment status.

The 1% Social Security Tax Explained

The first income slab is often called the “tax-free limit” or “base exemption limit.” However, that description can cause confusion.

For a normal salaried employee, the first slab generally attracts 1% Social Security Tax. Therefore, it is not a zero-tax slab.

For FY 2083/84, the 1% rate applies to the first NPR 10 lakh of net assessable income for a non-SSF employee.

Who Pays the 1% Tax?

A resident salaried employee who does not qualify for the SSF waiver generally pays the 1% tax on the first slab.

The employer includes this amount in salary TDS. Therefore, it may appear as part of the income tax deduction on the salary slip.

Is the 1% Applied to Gross Salary?

Not always.

First, eligible deductions reduce gross assessable income. Then the tax rates apply to the remaining net assessable income.

For example, suppose an employee has:

• Gross annual salary: NPR 11,00,000
• Eligible retirement contribution: NPR 1,50,000
• Net assessable income: NPR 9,50,000

The 1% applies to NPR 9,50,000, not NPR 11,00,000. The estimated tax would be NPR 9,500 for a non-SSF employee.

Who Does Not Pay the 1% Tax?

The IRD schedule excludes certain income or taxpayers from the 1% first-slab tax. These include eligible contributors to the contribution-based Social Security Fund.

The official schedule also refers to registered sole proprietorship taxpayers and qualifying pension or retirement-fund income.

For salaried employees, the main point is simple:

• Eligible SSF contributors receive the 1% waiver.
• EPF contributors do not automatically receive the waiver.
• CIT contributors do not automatically receive the waiver.

If an SSF contributor has income above the first slab, the higher tax slabs can still apply.

How Salary Tax in Nepal Appears on a Salary Slip

A salary slip may contain several figures. Each one has a different purpose.

Employees often compare only gross salary and net salary. However, this does not show how the employer calculated tax.

To check a salary slip, follow this order:

1. Confirm the gross salary and allowances.
2. Add any bonus or festival payment.
3. Check PF, CIT and SSF contributions.
4. Confirm insurance deductions.
5. Review net assessable income.
6. Apply the correct fiscal-year tax slabs.
7. Check any rebate.
8. Compare annual tax with monthly TDS.

A monthly payslip may show only one month’s deduction. Therefore, ask payroll for the annual tax calculation if the figure is unclear.

Special Tax Rebates in Nepal

Nepal provides specific deductions and rebates to qualifying taxpayers. However, these benefits do not all work in the same way.

A tax deduction reduces taxable income. In contrast, a tax rebate reduces the tax already calculated.

This difference can change the final result.

10% Tax Rebate for Female Employees

A resident woman who earns only remuneration income may qualify for a 10% rebate on the calculated tax.

The rebate applies to the tax amount, not to salary.

For example, suppose the calculated tax before rebate is NPR 50,000.

The rebate would be:

NPR 50,000 × 10% = NPR 5,000

The final tax would be NPR 45,000.

The employee must meet the conditions for the rebate. The assessment option used by payroll can also affect eligibility.

A woman earning business, investment or other income should not assume that the salary-only rebate applies automatically.

Tax Relief for Persons with Disabilities

The disability benefit is not a general 10% tax rebate.

A resident person with a qualifying disability can receive an additional deduction equal to 50% of the applicable basic exemption or first-slab limit.

For FY 2083/84, the first slab is NPR 10 lakh. Therefore, the additional deduction may reach NPR 5 lakh, subject to the legal conditions and accepted evidence.

The deduction reduces taxable income before the tax slabs apply.

An employee should provide the required disability documentation to payroll. Otherwise, the employer may not apply the adjustment.

Remote-Area Tax Deduction

A person working in an approved remote area may reduce taxable income by a fixed amount.

The amount depends on the official classification of the work location.

The employee’s normal home address does not determine the deduction. The approved classification of the work location matters.

For example, an employee who lives in Kathmandu but works at a qualifying remote branch may be eligible. In contrast, an employee whose permanent home is in a remote district may not qualify if the work location is not eligible.

Keep the posting letter or employer confirmation as evidence.

Foreign or Outstation Allowance

Employees posted at Nepalese diplomatic missions outside Nepal may receive a deduction for foreign allowance.

The current IRD schedule allows 75% of the qualifying foreign allowance to be reduced from taxable income.

This provision should not be confused with a normal domestic travel allowance. A local tour, branch visit or temporary training programme does not automatically qualify for the 75% treatment.

Payroll should review the employee’s posting status and the nature of the allowance before applying the deduction.

Other Deductions That Reduce Income Tax in Nepal

Several common payments may reduce taxable income before the tax rate in Nepal applies.

The retirement contribution limit applies to combined eligible contributions. It does not give a separate NPR 5 lakh limit for EPF and another NPR 5 lakh limit for CIT.

Also, a deduction does not return the full amount to you as cash. It only reduces the income used to calculate tax.

Practical Salary Tax Calculation for FY 2083/84

Suppose a salaried employee has these annual figures:

For a non-SSF employee, the estimated tax would be:

• First NPR 10,00,000 at 1% = NPR 10,000
• Remaining NPR 4,60,000 at 10% = NPR 46,000
• Annual tax before rebate = NPR 56,000

The estimated monthly TDS would be:

NPR 56,000 ÷ 12 = NPR 4,667

If the employee qualifies for the 10% female remuneration rebate:

• Tax before rebate: NPR 56,000
• Rebate: NPR 5,600
• Net annual tax: NPR 50,400
• Estimated monthly TDS: NPR 4,200

The actual monthly deduction may change after a bonus, salary increase or late submission of deduction documents.

Why Monthly TDS Can Change During the Year

Employers usually estimate annual salary tax and divide it across the remaining payroll months.

Therefore, monthly TDS can change when:

• The employee receives a salary increase.
• The employer pays a bonus.
• The employee joins during the year.
• The employee resigns before year-end.
• Payroll receives a new CIT declaration.
• An insurance premium receipt is submitted.
• The employee changes SSF status.
• A taxable allowance is added.
• An earlier payroll calculation needs correction.

For example, a Dashain bonus may push part of the employee’s income into the next slab. Payroll may then increase TDS for the remaining months.

A higher TDS in one month does not always mean the employer used the wrong tax rate. Ask for the revised annual calculation before raising a dispute.

How to Check Whether Your Salary Tax Is Correct

Use this checklist when reviewing your salary slip:

• Check the fiscal year.
• Confirm gross salary and bonus.
• Review taxable allowances.
• Verify EPF, CIT and SSF amounts.
• Confirm insurance payments.
• Check single or couple assessment.
• Verify the female employee rebate.
• Check remote-area or disability relief.
• Review the slab-by-slab calculation.
• Divide annual tax by the applicable payroll months.
• Compare the result with monthly TDS.

You can use our salary tax calculator to estimate the result. However, confirm the final figure with your employer, the Inland Revenue Department or a qualified tax professional.

Frequently Asked Questions

Final Summary

The current tax rate in Nepal for individuals starts at 1% and rises through progressive slabs. For FY 2083/84, single and couple assessments use the same tax limits.

The Income Tax Act 2058 provides the legal basis for employment income, couple assessment and employer tax withholding. However, annual Finance Acts can change the rates and deduction limits.

When checking salary tax in Nepal, do not look only at gross salary. Review eligible deductions, net assessable income, rebates and the slab-wise calculation.